w IH^Sttt HHs'wiv; ' ! i'!:ri l( 'I:ii 1li ,: i ^lj'i'l | i! iiliilfeii-,^;:,!:::!:!!!!: liliiiiiiiir 5 i'ilJ aMHsSSsiBJl '- ; '"- : .:. ■■:;' ',-M'fiiv. i t r f4* OfartteU Intoerattg IGibrarg Strata, Ken) $otk BOUGHT WITH THE INCOME OF THE SAGE ENDOWMENT FUND THE GIFT OF HENRY W. SAGE 1891 en this volume was taken. To renew this book copy the call No. and give to the librarian. HOME USE RULES s Xlf'Wt"W'Js •Af%£S496Sh*« All Books subject to recall All borrowers must regis- ter in the library to borrow books for home use. All books must be re- turned at end of college year for inspection and repairs. Limited books must ' be returned within the four week limit and not renewed. Students must return all books before leaving town. Officers should arrange for the^eturn of books wanted ring their absence from town. Volumes of periodicals and of pamphlets are held in the library as much as possible. For special pur- poses they are given out for a limited time. Borrowers should not use their library privileges for the benefit of other persons. Books of special value and gift books, when the giver wishes it, are not allowed to circulate. Readers are asked to re- port all cases of books marked or mutilated. Do not deface books by marks and writing. Cornell University Library HF3029 .P42 American foreign trade the United State olin 3 1924 032 463 246 The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924032463246 AMERICAN FOREIGN TRADE AMERICAN FOREIGN TRADE The United States as a World Power in the New Era of International Commerce BY CHARLES M. PEPPER IE* Former Foreign Trade Adviser to The Department of State; Author of "Tomorrow in Cuba'; "Panama to Patagonia," etc. f^vm NEW YORK THE CENTURY CO. 1919 3fr Copyright, 1919, by The Centtjby Co. Published, August, 1919 TO ALBERT G. ROBINSON PEEFACE The epoch of the Great War is the beginning of a new era in the trade relations, as in the political relations, of the world. At the outset the war was viewed merely as an interlude in the shifting drama of international commerce. But the drama proved to be tragedy. In- stead of an interlude, the war became the prelude to economic events whose full significance is as yet some- what dimly apprehended. One of its consequences is the readjustment of their industry, trade and finance by all nations. The United States in this readjustment has become the world power in international commerce. Foreign trade for the first time in their history has come to have definite meaning to the American people. They have begun to realize its place in their own economic system. It may be viewed as a phase of domestic policy or in the manifold aspects of world policy. The larger view invites. It assumes readiness to recognize that exports are only one factor in foreign trade ; in other words, that this is a question of mutual markets. It presumes that the manufacturer in the United States is ready to seek the market abroad as a primary market. It involves understanding of the United States as a lending country with the opportuni- ties and the responsibilities that belong to a creditor nation. Information concerning the resources, the industries, viii PKEFACE and the trade of the several sections of the world, the economic tendencies and fiscal policies of the nations, is the basis necessary to an intelligent survey of the entire field of foreign commerce. This information I have sought to give. For the benefit of the very large number of persons who confess a constitutional shyness for figures a somewhat sparing use of statistics has been made. Yet it may be suggested that the trade statis- tician, followed with discrimination, is a much safer guide than the political economist with his closet de- ductions, or the platform orator with his platitudes and generalities. Since information rather than the propaganda of opinion is the purpose of the pages that follow, a few observations may be made on such views as are given expression. The new era is one of international cooperation in finance and trade to a degree undreamed of in the period before the Great War. The United States is the com- manding factor in this cooperation. But this circum- stance does not change the essential conditions under which commerce is conducted. Emotional economics have no part in international commerce. It deals with actualities. International trade benevolence with its overlapping bureaucracy is likely to be as demoralizing as indiscriminate charity. The world's markets are com- petitive and it is good for the world's consumers that they should be so. Equally it is good that each nation should follow its own bent and should give play to its own genius in cultivating these markets. Inherited paternalism flowering into governmental control, autocratic state participation in trade, finance, and industry, may suit some peoples and obtain the PREFACE ix measure of popular support necessary to incorporate them into national policies. Individualism with the wide field it affords to initiative and the encouragement it gives to the industrial and commercial instinct, may prove more suitable to other peoples. It is likewise for them to determine their own national policies. That the American spirit in developing world trade will be strongest under the individual impulse is the author's belief. The correctness of this belief may be examined and tested in the light of a general survey of the under- lying economic and political conditions which affect the trade of the several countries of the world. C. M. P. Washington, August, 1919. CONTENTS CHAPTER I PAGE What Foreign Trade Is 3 Buying as well as selling goods abroad — Nature unchanged by the Great War — Imports the measure of world commerce — Comparison of quantities and values — New high price levels — Transportation as an element — Relation of foreign trade to domestic prosperity — Internal factors — United States as an exporting country — Evolution from agri- cultural products to manufactured articles — Farm implements and the blast furnace — Readjustment of visible and invisible balances — Sig- nificance of change to a creditor nation CHAPTER II The Farm in Foreign Trade 19 Economic basis of the new agriculture — Checking the food waste — War-time production — A bushel of wheat per person in export trade — Corn and swine — Cattle and meat products — Cotton as a factor in foreign business — Insufficiency of production outside the United States — Lancashire's futile efforts — The American farmer's prospects CHAPTER III Machinery and Nationalised Efficiency .... 33 Standardizing European methods — England's progress in scientific effectiveness — American individualized efficiency — Machinery's place in industrialism — Development of productive power — Decrease of handi- craft — Monotony of machine craft — Welfare projects — Prohibition as an economic element — England's drink problem — The industrial woman of the world — Status in the United Kingdom — Position in the United States — A world reserve factor in production CHAPTER IV Eaw Materials 47 Iron the blood of industrial nations — Ore resources of the world — Distribution in the United States — Coal reserves — Sources of man- ganese — Copper and other industrial metals — Petroleum as fuel— Where the oil fields lie— Water power as motive force— Raw materials of textiles— Great Britain's basis of iron and steel industries— Geo- graphical advantages — Points in competition with the United States — What Lorraine iron and Sarre coal mean to France xi xii CONTENTS CHAPTER V page The Diplomacy of Commerce 62 The shipwrecked Yankee skipper and mutual bargaining — The cele- brated Methuen treaty — Objects sought by England and by Portugal — Adam Smith's objections — Disraeli's definition of trade diplomacy— Palmerston on the qualities of negotiators — Tariffs modified by polit- ical motives — Concessions by Japan and France to Great Britain — Commercial diplomacy in Europe in 1914 — Trade spheres and rap- prochements — After the war — Functions of trade diplomacy under the new conditions CHAPTER VI Economic Alliances and Favored Nations .... 74 Echoes of the Paris Pact of 1916 — Summary of its provisions — Inheritance in Peace Settlement — Economic boycotts and trade wars — Fiscal policies of the victors — New basis for commercial intercourse — Prospective readjustment of favored nation practice — Review of the European doctrine — Application to tariffs — Maximum and minimum schedules — Germany's conventional tariffs not the work of super- men — Methuen principle modernized in the Anglo-Japanese Treaty — Industrial instinct of nations— Trend to nationalistic policies in world trade CHAPTER VII British Trade Policy 90 Edmund Burke's survey of England's trade two centuries ago — Before and after the Great War — Imperial preference as an outcome — From Joseph Chamberlain to Lloyd George — Protective tariff tendencies in war measures — The Budget of 1919 — The self-govern- ing colonies — India and the dependencies — The world view — Disguised or straightforward protection ? — Government participation in finance and commerce- — British trading corporation — Direct subsidies — Some national traits — British interests the key to British, policy CHAPTER VIII American Trade Policy 110 Historic background — Commercial character of early diplomacy Treaties after the Civil War — Blaine reciprocity conventions — Dingley bill provisions — Cuban reciprocity treaty — Canadian reciprocity agree- ment — Adoption of double tariff system — Maximum and minimum ex- periment — Repeal by Underwood Act — Review of favored nation prac- ticed—Reasons for conditional interpretation by United States — Diplo- matic correspondence — Cuba and other exceptions — Concluding resume CHAPTER IX American Trade Policy (Continued) 125 Adjustment of United States commerce to competitive conditions Flexible and inflexible tariffs — Defects in maximum and minimum pro- visions of Payne-Aldrich Act — Amendment proposed by Secretary Knox — Rejected retaliatory clause in Underwood bill — Tariff Commission's approval of retaliatory schedules — Means of securing equality of treatment for American goods — Bargaining tariffs — House of Repre- sentatives as source of revenue legislation — Dves and potash — Export combinations — The Webb-Pomerene Law — Price lists abroad and at home — Export railway rates — Objections to government control In- dividual enterprise in foreign business CONTENTS xiii CHAPTER X p AG e The Cargo-Carriers 140 Circumstances leading to revival of the merchant marine — The golden age of American shipping — Measures for its restoration — The war boom — Failure of tariff devices — Shipping Act of 1916 — Supplemental legislation — Increased tonnage of the United States — The shipbuilding program — Questions of policy — The Seaman's Act — Reaction from Gov- ernment ownership — Competition with Great Britain CHAPTER XI Continental Europe and the United States . . . 153 Vital economic changes — Factors in France's industrial reconstruc- tion — Colonial commerce — Dependence on American capital — Fiscal re- lations with the United States — Germany's subtracted raw materials — Melting away of Naumann's Mid-Europe dream — Past and prospective trade with the United States — Importance of copper and cotton— Austro- Hungarian remnants — Belgium's rehabilitation — Italy's terri- torial expansion and industrial ambition — Import of capital — Scan- dinavian group — Spain and other countries CHAPTER XII Russia and the Near East 168 Constantinople as an international mart — The Black Sea a world lake — Jugo-Slavia and the Adriatic — Bulgaria and Rumania — No Balkan Customs Union — Greater Greece — American enterprise in Turkey — Russian economic units — Survey of the whole — Commerce of the past — Trade relations with the United States — Territorial sub- traction — Agricultural and mineral resources that remain — Siberia s status — Foreign capital the hope of the future CHAPTER XIII Economic South America 183 The Southern Continent a world market — Export taxes a Spanish colonial inheritance — Limited resources for manufactures — Agricul- tural and mineral products the source of purchasing power — Brazil's rubber and coffee — Iron ore and manganese — Decentralized fiscal policy —Argentina's grain and lifestock — Lack of minerals — Uruguay and Paraguay — Chile's copper and nitrates — Protective tariff tendencies — Peru's varied products — Protective and export duties — Bolivia and Ecuador — The Caribbean region CHAPTER XIV South America as a Market for Europe 200 Salient geographical aspects — Interchange among the several coun- tries— Ocein routes to the old world— Panama Canal— Racial ties with Europe— Immigration from the Mediterranean countries— French SteUectual influenc! a trade factor— Spain and Italy— Reasons for England™ prtaiacy— A century's normal growth— British investments -^Germany's methods— Teutonic colony in Brazil unimportant— Marked other countries not losi^Tragedy of Belgium's commerce— Europe's prospects xiv CONTENTS CHAPTER XV fam South America as a Market for the United States . 214 Aspirations from Clay to Blaine — Trade not hampered by tariff policy of the United States — Brazilian preference — Analysis of gen- eral commerce — Nature of increase during the war — Shift from Europe — Permanent and temporary gains — Character of after-the- war business — Causes of adverse and favorable balances — Basis of future growth — Loans and investments — Development enterprises — What a billion dollars invested in South America will mean CHAPTER XVI Economic Destiny in the Caribbean 232 What the purchase of the Danish Islands foreshadows — The Carib- bean crescent as an economic curve — Cuba's sugar cane and tobacco ■ — Porto Rico's coffee and sugar — British Possessions — Jamaica an isolated unit — Proposed Canadian-West-Indian Federation — Trade Agreement of 1913 — Panama and Central America — Bananas and coffee — Foreign investments — Economic aspect of increased produc- tiveness in the Caribbean area — Influence of the United States — Posi- tive national policy — The protectorates — Nicaragua Treaty — Benev- olent coercion — Santo Domingo's objection — Significance of the Haitian treaty — Promise of stability and order — Future commerce CHAPTER XVII Canada, the Nation to the North 248 War debt and peace resources — Depth of national spirit — Relation of natural resources to trade — Fisheries and forest — Mineral wealth — Wheat fields of the northwest — Other crops — Reasons for daring rail- way ventures — Basis of industrial development — Iron and steel mills — Fiscal system and preferential tariff — Pre-War commerce with Europe — After-the-war prospects — Trade relations with the United States — Reasons for rejecting the reciprocity agreement— Close business intercourse in the future CHAPTER XVIII Japan and Mutual Markets 265 _ New riches — Herbert Spencer's rejected advice — Gains from western civilization — "What the island power is — Sparse agricultural resources ■ — Nationalization of raw materials — Political evolution — Winning of economic independence — Fiscal policy — War prosperity — Fundamen- tals of future commerce — Trade relations with the United States The Knox Treaty — Questions of the Pacific CHAPTER XIX China and the Commerce of the Pacific . . 277 Economic definition — Mineral resources — Nature of foreien trarto Small volume— Relations with other countries— John CM™ -Root-Takahira Decl.ration-Lan.tag-I.hii Agreement^China's oZ statement— Japan s overlordship— Outcome at Peace Conference— Bankers' loans— Influence on material development— Fiscal nolicvll Economic independence the acid test for the Great Powers— United States as an Interested Friend "° uareaa CONTENTS xv CHAPTER XX PAGE Investments Abroad 291 Trade that follows the export of capital — Fundamental changes as a consequence of the war — Review of practice in the past— Extraterri- torial character of branch factories — State Department formula re- garding loans and development enterprises — Popular prejudice against claims — Experiences in Spanish-American countries — Lack of continu- ous national policy — The Chinese incident— President Wilson's reversal — Principle of the international consortium — The world as the field of American investments CHAPTER XXI The American Business Man 307 Relation to the government changed by the war — Causes of aloofness — Distrust of bureaucracy — Why he does not come to Congress — Law- yer politicians equally ignorant of international questions — Some exam- ples of business ignorance — Sporadic foreign trade forays — Applying the remedy — Success of the big concerns — Coordination with the gov- ernment — Cooperation in selling abroad — Educational factors — World commerce as the business of the United States APPENDIX A. Reciprocity and Retaliatory Tariff Provisions . 322 1. McKinley Act. 2. Dingley Act 3. Proposed Knox Amendment 4. Rejected provisions of Underwood Bill B. Text of Haitian Fiscal Protectorate Treaty . . 332 C. China and the Pacific 336 1. Secretary Hay's Open Door Letter 2. Root-Takahira Declaration 3. Lansing-lshii Agreement Index 343 AMERICAN FOREIGN TRADE AMERICAN FOREIGN TRADE CHAPTEE I ' WHAT FOREIGN TRADE IS Buying as well as selling goods abroad — Nature unchanged by the Great War — Imports the measure of world commerce — Comparison of quantities and values — New high-price levels — Transportation as an element — Relation of foreign trade to domestic prosperity — Internal factors — United States as an exporting country — Evolution from agri- cultural products to manufactured articles — Farm implements and the blast furnace — Readjustment of visible and invisible balances — Sig- nificance of change to a creditor nation. FOREIGN trade, to the popular mind, is selling goods abroad. Buying goods abroad receive lit- tle thought. That is comprehended in the more resounding term of international commerce, which means the movement of merchandise across boundary-lines both ways. Exports and imports are the opposite pages of a commercial nation's ledger. The mechanism by which the interchange of commodities is effected, the shipments of specie to balance accounts, and the adjustment of credits without such shipments, are somewhat vaguely understood as processes entering into international commerce. The popular conception of foreign trade might seem sufficiently clear for the purposes of a work of general 3 4 AMERICAN FOREIGN TRADE character. It reflects the manner in which the ordinary man views the subject, and ordinary men, in their total- ity, make up the American people. But the significance of the United States as a world power in international commerce requires a more precise definition. American foreign trade is the United States buying goods from other countries as well as selling products to other coun- tries. The term " American " is used with the knowl- edge that South-Americans, Central-Americans, Mexi- cans and Canadians have valid objections to one nation appropriating it. But accepted usage in the objecting nations themselves may be urged in mitigation of the of- fense. It is less awkward to follow the common practice than to differentiate among several Americas and po- litical subdivisions of the Americas, or to point out the distinction between the United States of Mexico, Co- lombia, Brazil or Venezuela and the United States of which Washington is the capital. The nature of foreign trade is not changed in the period of reconstruction following the Great War. The change is simply in form from destructive war consumption to reproductive peace consumption. Production resumes its normal course. War activities die ; peace activities quicken into fresh life. New industries are born out of the war chaos. Old markets survive. New markets are created. Yet wheat, corn, pork, beef, mutton, sugar, coffee, tea, cotton, wool, iron, copper, oil, coal, lumber, the interchange of these products in their raw or manu- factured state, constitute the foreign trade of the new as of the old era. The consequences of the Great War change the cur- rents of the world's commerce, and that is all. Political re-alinements, groupings of peoples under changed WHAT FOREIGN TRADE IS 5 boundaries, the birth of new nations, creditor countries becoming debtors, and debtor countries becoming credi- tors, do not substantially modify the nature of foreign trade, though they may alter materially the conditions governing that trade. Its nature may be examined in the general aspect before describing the position of the United States. The imports of all the countries of the world taken to- gether are the only measure of the total commerce. They are at best a defective measure, yet they approximate a real standard, for they show the value in money totals of goods that have crossed boundary-lines, and thus have become foreign trade. The common error is to add im- ports and exports. This practice ignores the fact that the exports of one country are the imports of another country, thus counting each transaction twice. Students of international economics, and manufac- turers seeking markets abroad, need not confuse their brains by too much effort to reconcile conflicting export and import statistics. Trade statisticians, on their part, between the uncertainty governing the exports of one country that become the imports of another country, and the varying values due to the numerous processes in- volved in the interchange of commodities, at best can only approximate the total of the world's commerce. They are like the metaphysicians who, seeking to define the conditioned and the relatively conditioned, are con- tent to discover some appearance in the midst of things. In general it is true that the difference between values in countries of exportation and countries of importation is made up of carrying charges, exchange paid to bank-; ers, and merchants' and shippers' profits; but it is al- ways questioned whether the total amounts thus paid ex- 6 AMERICAN FOREIGN TRADE plain the whole difference in computed values. Allow- ance for freight, insurance, re-exports, customs duties, arbitrary tariff valuations, market values at the place of manufacture, different classifications, and different ad- ministrative methods, is inconclusive. Tpo often it is misleading. The most painstaking investigation of these factors only gives baffling discrepancies. Growth in population, machinery as an element in production, subdivision of labor, new lands opened to cultivation — all these are factors in the increase of world trade during a given period. But it is not of great significance whether the total of import values due to these and other causes, which constitutes the world's commerce, amounts to thirty billion dollars or to thirty- one billion dollars in a given year. The period preceding the Great War was one of ab- normally high prices. Whether this was wholly due to gold inflation it is not necessary to examine. The re- sult was to give a fictitious increase to world trade everywhere. There had been some increase in quantity as well as in values, but not a proportionate one. Ex- panded commerce, through expanded values, with an actual decrease in the quantitative volume of trade, was an incident of the war. Dollar figures, in describing world commerce, appeal to the imagination by their stupendousness. To talk in billions is to think in billions, and the habit of mind grows ; yet the imagination, in dwelling on these figures, should not become too riotous. Where the quantities of goods exported increase with rising prices there is a real advance in foreign trade, although the augmented quantities may not be proportionate to the advanced prices. What was a dollar's worth of wheat in export WHAT FOREIGN TRADE IS 7 trade in the midsummer of 1914 had become two dollars' worth in the midsummer of 1917; but the bushel was still only sixty pounds, and five bushels of wheat were still required to make a barrel of flour of one hundred and ninety-six pounds. Farm products afford numerous illustrations of an actual decrease in volume, as measured by quantity, with an increase in value, as measured by prices. Be- fore the United States became a participant in the war, and before the Government fixed a minimum price for wheat, this tendency was clearly manifested. The same phenomenon was shown in the case of iron and steel products. In the fiscal year 1915, 259,643,000 bushels of wheat, valued at $333,523,000, were exported. In 1917 the ex- ports were 149,532,000 bushels, valued at $298,180,000. For the same years, respectively, the exports of wheat flour were 16,183,000 barrels, valued at $94,869,000, and 11,942,000 barrels, valued at $93,198,000. In this case a decrease of 4,240,000 barrels meant a decrease of less than $2,000,000 in the values. In iron and steel products exports of 220,570,000 pounds of wire rods were valued at $2,744,000 in 1915. The value of 329,786,000 pounds was $9,870,000 in 1917. The value of 168,664 tons of structural iron and steel ex- ports was $6,289,000 in 1915. The value of 339,500 tons was $22,911,000 in 1917. These examples show that the quantity of exports and imports is a more correct measure of foreign trade than' values or prices. Dollar figures should be interpreted in that light. It is apparent, too, that values in the future will afford little satisfaction in seeking to make trade comparisons with the past. The period before the 8 AMERICAN FOREIGN TRADE war, as has been stated, was one of abnormal high prices. The war period was one of inflated prices. The period after the war is one of a permanent higher-price level. The dollar is a dearer dollar the world over because it buys less. Some recessions from the extreme prices may be reached, especially in food commodities, but they are not likely to affect the general situation. The year 1919 may be taken as the yardstick for the years to come. Five years thereafter, or ten years there- after, it will be possible to make comparisons on the basis of the year 1919. To attempt comparisons on the basis of 1914 would require by laborious processes to set forth what a dollar bought then and what it buys in the years after the war. It is an unnecessary labor. In fixing the position of the United States in world commerce in the future it may therefore prove desirable to give closer attention to quantative measurement rather than to price measurement, or at least to remember that the true nature of this foreign trade is not to be judged solely by tables of values. Dollar figures should be interpreted in that light. They do not impair the position of the United States in international commerce as it may be ex- hibited by values. The essential elements of the foreign trade of the United States may be classed as visible and invisible. Some of them are as clear as physical objects to the naked eye, while others are portrayed only through men- tal imagery. The quantity of goods exported and im- ported, the volume of the movement, and the total of prices given in terms of monetary values are a simple matter of statistics; but there are intangible elements which also must be taken into account in determining the true worth of foreign trade in the industrial and com- WHAT FOREIGN TRADE IS 9 mercial movement. These include the gain to domestic industries by providing an outlet for excess products, the domestic markets created by export trade, and the steadying influence of the foreign market on the home market ; the effect of the wages paid in production and distribution, the demand created for products of the fac- tory through the business built up by investments abroad, and the benefits arising from the employment of bank reserves in international commerce. The transportation element may be shown by examples of cargoes originating at points distant from the sea- board. A carload of agricultural implements shipped from Chattanooga to Savannah, for export, before the war, paid at the rate of twenty-five cents per hundred pounds in carload lots. This meant $50 for a single carload of 20,000 pounds, or $1000 for a trainload of twenty cars. The $1000 freight on the twenty carloads was divided beween labor and capital, since it was paid out in wages, salaries, interest on bonded debt, and in dividends on stock. It was an addition to the amount paid out in the wages of production from the primary material until this was transformed into a carload of plows, for which the Argentine farmers paid the com- munity of Chattanooga. Similar analysis may be applied to a hundred carloads of mining machinery shipped from Chicago to New Or- leans for ocean carriage through the Panama Canal to the mines of Peru and Chile ; to a trainload of coal from the West Virginia mines to tidewater at Newport News for sea freightage to Eio de Janeiro or Buenos Aires ; to a cargo of crucible steel products from Pittsburgh to New York for ocean carriage to European ports; to twenty carloads of wire products from Birmingham to Savannah 10 AMERICAN FOREIGN TRADE for shipment to Brazil and the Argentine Republic ; to a trainload of packing-house products from Kansas City to New Orleans for distribution throughout the West In- dies ; to a cargo of wheat from the Dakotas or flour from Minneapolis to seaboard for carriage across the Atlan- tic to Italy and Spain ; or to carloads of cotton from the Texan plantations to Galveston for ocean carriage to Liverpool. The deduction is clear that the transporta- tion of products from the interior to seaboard, or to the frontier, as in the cases of Canada and Mexico, is an added source of income to the whole country that would not exist in the absence of foreign trade. Another intangible, but very definite, benefit of foreign trade is that of having an excess of goods taken from the home market, and of aiding the manufacturer to reduce overhead charges and secure full return on his capital by enabling him to employ his factory capacity to its full extent. This does not need to be stated in theoretical terms. In illustration, the anarchy in Mex- ico in 1913 caused a falling off of $20,000,000 in the ex- portation of products from the United States, so that the factory output was reduced by a definite quantity, and there was less employment. This meant just that much subtraction from the gen- eral sum of industrial activity in the profitable employ- ment of labor and capital during a year of notable busi- ness depression. The loss was not entirely negative, since the purchasing power in the domestic market was reduced by the amount of money that would have been received from these commodities, a loss to the producer of the raw material that would have been consumed in the factory, to the wage-earners who would have turned it into finished product, and to the transportation com- WHAT FOREIGN TRADE IS 11 panies that would have carried these products to the Mexican markets. A common method of illustrating the benefit of foreign trade is the geographical one. This was employed by Mr. Blaine in his campaign for enlarging the markets of the United States in South America. He analyzed the cargo of an outgoing vessel, the various commodities of which the cargo was made up, and the part of the country from which these commodities came. This method might be called the sentimental one. It is use- ful in localizing the subject. The relation of foreign trade to domestic prosperity must be determined in the light of the intangible ele- ments as well as of the visible values, but even in a com- parison of visible values the tendency is to overestimate the internal movement and to understate the foreign movement. The wheat-fields of the West and the cot- ton-plantations of the South are drawn on by the flour- mills and the textile factories for raw material whether their products be consumed at home or be sent abroad. The same fields and the same factories provide the in- dustrial and commercial activities, so that there is no exact means of separating the essentials of domestic trade from the essentials of foreign trade. They are not distinct, but blend together. The factors of internal trade in the United States, in official formula, are manufactures, agricultural prod- ucts, mining products and minerals, fisheries and furs, the value of imported goods, and the value added to the foregoing groups by transportation. A midyear of the war period serves for illustration. An estimate on this basis fixed the internal trade of the United States for 1915 approximately at $45,000,000,000. The value of 12 AMERICAN FOREIGN TRADE the foreign trade for the same year, as shown by actual statistics of exportation, was a fraction less than $4,500, 000,000. On this reckoning the foreign trade in the year given was approximately ten per cent, of the commercial activities of the country, without allowance for the intangible values, such as those noted above. It may be remarked further that the domestic movement of com- merce is based very largely on estimates, while export trade is given in definite terms, based on the specific declaration made by shippers under regulations laid down by the Government. Two opposite schools of political thought in the United States are not so far apart in their mental attitude to- ward foreign trade. To those of the Chinese-wall belief exports are of no consequence. They would be content solely with the domestic movement. The other school, that of free trade tendencies, while theoretically equally interested in exports and imports, in practice shows lit- tle regard for exports. Its concern is for imports. Even the scholar in politics sometimes errs in failing to give to goods sent abroad their proper place in the commerce of the country. President Wilson, in a speech at Cincinnati in 1916, declared that competent author- ity placed the export trade of the United States at only four per cent, of the total commercial movement of the country. One of the statistical bureaus of the Govern- ment, the Bureau of Foreign and Domestic Commerce, reached a different conclusion, as follows: Factors of Internal Trade of the United States 1915 Manufactures produced, 1915 $27,800,000,000 (Based on Official Census, 1914, which gave $24,246,323,000.) Agricultural products 10,500,000,000 WHAT FOREIGN TRADE IS 13 Mining Products, minerals, etc $ 2,500,000,000 Fisheries, furs, etc 500,000,000 Value of imported goods, 1915 1,700,000,000 Value added to foregoing groups by transpor- tation 2,000,000,000 (Freight earnings of leading railways, In- terstate Commerce Commission.) Total Internal trade $45,000,000,000 Value of foreign commerce, fiscal year, 1915 $ 4,442,759,000 Relation of foreign trade to estimated in- ternal trade, 9.83 per cent. The turn-over of a country's business, as measured by bank clearings, stock sales, and similar transactions, is not a true standard on which to determine the compara- tive values of domestic and export trade. It presents a series of duplications. Production is a more certain standard. It reaches back from the goods either on the sales-counter or on board the outgoing vessel, to the farm and the forest, the mine and the factory. The broad view is the one to be taken. This recognizes that domestic trade and foreign trade are not actually sep- arable in determining the factors in national prosperity. They are interworking and interdependent, mutually sus- taining and strengthening each other. With this brief exposition of what constitutes for- eign trade a.nd its relation to domestic prosperity, the place of the United States in world commerce may be described. As an exporting country it has progressed from the primitive barter of surplus farm products and the raw materials of industries to the sending abroad of all classes of manufactured products. The nature of this transformation is shown vividly in the exports of agricultural machinery. John Deere, the Vermont 14 AMERICAN FOREIGN TRADE blacksmith who settled on the prairies of Illinois and re- placed the crude iron blade of the pioneer farmer by steel plows, was one of the leaders in the transition from the export of agricultural products to manufactured articles. The chilled plow of John Oliver was another chapter in this trade expansion. Cyrus McCormick, Hussey, Whit- ley, Warder, and their rugged generation of inventors and forceful manufacturers made the romance of the reaper in the Mississippi Valley a world romance. So it was, too, with the threshing-machine. At the close of the Civil War the enterprise of these pioneer makers of farm machinery had opened a for- eign market for agricultural implements to the amount of a million dollars. The exports were almost station- ary for the next ten years. Then they began to grow, and the growth was rapid until the business of exporting agricultural machinery became a distinctively national one. This is the progress in the exports through the dif- ferent periods : 1893 1898 1903 1908 1913 $5,027,000 $12,432,000 $21,006,000 $22,073,000 $40,572,000 The blast-furnace, with its multiform products, is the most comprehensive and illuminating chapter in the commercial expansion of the United States and affords the most striking illustrations of the changing nature of American-foreign trade. The eye in traveling across the page sees the march of exports of iron and steel and their manufactures in this wise : 1893 1898 1908 1913 $30,106,000 $70,400,000 $184,000,000 $304,600,000 The slender thread which transmits the mysterious WHAT FOREIGN TRADE IS 15 force of nature into myriad industrial activities is an- other example of the new industrial factors in interna- tional commerce which have entered into the changing nature of the foreign trade of the United States. The statistical story of the red metal is paragraphic. It is told in the statement that in 1913 the exports of do- mestic copper and its manufactures, excluding ore, amounted to $140,165,000 as against $4,525,000 in 1893. The electrical industry development is a chapter in cop- per. In 1914 the exports of electrical machinery and appliances were approximately $25,000,000. In 1893 they were not important enough to have a category of their own, but were included under iron and steel pro- ducts. The modern miracle of the motor vehicle and its ac- cessories is an even more striking instance of the chang- ing characteristics of American export trade. It starts with a cipher. In 1900 there were no statistics of ex- ports of automobiles and their accessories. In 1914 the exports were $38,000,000. The war year 1917 carried them to more than $100,000,000. Possibly the aircraft of commerce will show a similar rapid growth. Evidence of the transformation in the character of the exports of the United States is exhibited in two twelve- month periods twenty years apart. It follows : Exports of, Domestic Merchandise 1 Crude Crude Prepared materials materials or semi- Semi-manu- Manu- for for prepared factured factured manufactures food-stuffs food-stuffs articles articles 1893 $247,289,000 $153,278,000 $247,075,000 $ 49,070,000 $130,000,000 1913. 731,758,000 187,907,000 321,204,000 408,807,000 776,297,000 i The statistics relating to American trade in these pages are drawn principally from the Statistical Abstract of the United States, the annual summary of Commerce and Navigation, and the other official 16 AMERICAN FOREIGN TRADE The most striking feature of the foreign trade of the United States in the future clearly will be the dominance of manufactured and semi-manufactured products in ex- ports, and the predominance of raw material for man- ufactures and of food-stuffs of the tropics in imports. This in large degree indicates what world markets will be most sought. Readjustment of the visible and invisible elements en- tering into the nation's balance of trade is one of the economic events of the present. Some of these factors are entirely shifted. The payment of ocean freights and insurance to foreign companies virtually is ended by the establishment of the American merchant marine. That was formerly one of the principal items in offsetting the nominal excess of exports over imports. Against this is the probability that the invisible balance due to remit- tances by European families to kinsfolk will be larger than in any period previous to the Great War. The mar- gin which thrift offers above the cost of living will be drawn on more heavily than ever to replenish distressed Europe. Moreover, the international travel account, sometimes called tourist outlay, which always was a counterbalancing factor, will be augmented in favor of Europe. Individual Americans and groups of Ameri- cans, whether drawn by morbid curiosity to historic bat- tle-fields, or moved by nobler sentiments, will travel over the Continent in much larger numbers than ever before. Interest payments abroad on many kinds of American securities, on the other hand, will suffer a sensible dim- inution, due to their return to the United States in the reports of the several Departments of the Government. It has not been thought necessary to indicate them by special references except in a few instances. WHAT FOREIGN TRADE IS 17 early period of the war. Offsetting the reduction of in- terest in dividends remitted by the United States on se- curities of private companies will be the interest pay- ments on the war loans made to the Government of the United States by the several governments of the Allied nations. In the initial stages of international settlements after the war the prospect was crisply put as a question of gold or goods. That is, would the United States seek to add to its enormous hoard of gold by exacting further payments, or would it take goods, which might glut its own market? The situation was not so acute. The other alternative was offered of taking foreign securities. This means principally the obligations of private cor- porations in European countries with or without the backing of their governments. The bare payment of interest on large volumes of these securities will in itself be another factor in the interna- tional trade account. The quantities of American ma- terial which will enter into this rehabilitation are an important element in the somewhat intricate process of the export of capital, but they are clearly a means of add- ing to the export trade of the United States. They are a form of investments abroad. Detailed calculation of this factor is not necessary in a general survey of the prospective export commerce. The supreme fact is that the United States has become a lending country, a creditor nation. The lending power of the Federal Eeserve Act is one of the ele- ments in its new status, but this power is not applied solely to the European war area. It has broader prospects in fields such as South America and China. In determining the circumstances of its foreign trade, 18 AMERICAN FOREIGN TEADE the United States will view the world as one mar- ket, but it will segregate the various groups marked by geographical lines and economic conditions pecu- liar to themselves. It will take account of the change in the nature of its exports from agricultural to manu- factured products, but it will not entirely ignore the place of farm products in this future trade. They call for consideration before entering into other aspects of the subject. CHAPTER II THE FARM IN FOREIGN TRADE Economic basis of the new agriculture — Checking the food waste — War-time production — A bushel of wheat per person in export trade — Corn and swine — Cattle and meat products — Cotton as a factor in ' foreign business — Insufficiency of production outside the United States — Lancashire's futile efforts — Reflex influence of crops on domestic prosperity — The American farmer's prospects. THERE is a new agriculture in the United States. It is not a creation or a consequence of the Great War. It was brought into vigorous life in the last third of the century before the war. Its functions during that period were beneficently exercised in increasing production of staple crops to meet a phe- nomenal emergency. Its functions in the future are to fix a definite place for itself in international food economics and to fix the position of the American farm in foreign trade. The new agriculture takes account of economic pro- duction, economic distribution, and economic consump- tion. It recognizes that the old basis of foreign trade, in which farm products formed the bulk of the exports, is gone, yet it does not assume that the prosperity of the farmer is to be maintained by discouraging exports of agricultural crops on the theory that all that can be obtained from the soil is needed for domestic consump- tion. Aware that the United States is virtually self-sustain- ing in the production of food supplies for an increasing 19 20 AMERICAN FOREIGN TRADE population, it seeks to adjust agricultural exports to the changes that have come upon the country through the growth in the exportation of manufactured commodi- ties, and to adapt itself to the greater changes which are yet inchoate, but which are sure to follow the transition from the upheaval of trade and industry on account of the war developments to commercial intercourse in nor- mal circumstances. American agriculture was awak- ened, quickened, vivified by the war demands, but it will require time to find its place in the new adjustments of international trade relations. The first consideration is that the situation should be met by an intelligent organized class of producers who understand the economic basis of the industry in which they are engaged. The farmer as a business man is no longer a myth. Unceasing educational propaganda by the National Government, supplemented by the state governments, has placed farming on a level with other forms of productive activities. Moreover, every year an increasing number of young men are graduated from agricultural colleges and similar institutions. They have been taught what scientific farming is and how it should be managed on a business basis. Rapidly they are supplanting the old-time agriculturist, who grew and marketed his crops in a haphazard way, and never knew whether he was making money or losing money. It is therefore the farmer as a business man who in the future is to be looked to in determining the place of the farm in foreign trade as well as in domestic business. He also may be depended on to understand the mutual rela- tion of the farm and the factory in its international, as well as in its national, bearing. The new agriculture, in the greater attention it gives THE FARM IN FOREIGN TRADE 21 to the processes of production and distribution, fixes the position of farm products in export commerce. The war stimulus will be more than temporary, yet always it should be borne in mind that agricultural production is a business proposition. The city farmer, who sits at the editorial table of the newspapers and institutes back-to- the-land movements, and who tells the farmer on the farm the need of raising more wheat or milch cows or beef cattle, or of rotating his crops more systematically, is not the person best fitted to advise what should be done. The farmer will do all these things when he sees a profit in them, and when he is able to find the labor required, since his business, while subject to more un- certainties than commercial business, nevertheless is based on growing crops and raising live stock for profit. There is profit for him in foreign trade, but he must be convinced that this is so before he will concern himself as to the best methods of bringing it about that a definite proportion of his products in one form or another find its way abroad. Managing his business from this point of view, the farmer is concerned as an observer as well as a pro- ducer. As an observer, while noting stolidly the crit- icism of his own wasteful methods of production, he takes note of the American habit of extravagance in con- sumption. Riotous wastage of food by American fam- ilies has been the wonder of foreign economists and the despair of domestic economists. The estimate of the Department of Agriculture in 1914 was that $700,000,- 000 was wasted annually. This was an enormous loss. In the past exhortations to increased efficiency in con- sumption through persuading the great body of consum- ers to be more saving had little effect. The American 22 AMERICAN FOREIGN TRADE family is a spending family, and its marked trait is con- tempt for petty saving. High cost of living in the midst of prosperity, with everybody employed, is one remedial agency that is working a reform. Even before the United States entered the war, the family market-basket could not be filled so lavishly as formerly. In conse- quence, its contents had to go further. American fam- ilies were becoming less wasteful because they lacked the means of being extravagant. It also is possible that the increased production of food-stuffs, through family gardening, engendered by the war stimulus to patriotic energies, as well as by the pinch of necessity, will not pass as an emotional spasm that will spend itself in a single season, but will have lasting results. American agriculture responded sympathetically to the encouragement given it in the war emergency. The whole story can be briefly told. The prospective demand was the incentive. The acreage planted was the re- sponse. In 1914 the corn acreage was 103,435,000; in 1918 it was 130,835,000 acres. The wheat acreage was 54,661,000 and 64,590,000 acres in the same years re- spectively. Yields are subject to climatic conditions, but they are measurably proportionate to acreage planted. The corn crop in 1914 was 2,673,000,000 bushels; in 1918, 2,749,000,000 bushels. The wheat crop in 1914 was 891,000,000 bushels; in 1918, 919,000,000 bushels. The live-stock industry was equally responsive. Beef cattle in 1914 numbered 35,855,000; in 1918, 43,- 546,000. Swine were 59,000,000 and 71,374,000 in the respective years. Sheep alone, whether for mutton or for wool, failed to show an increase. Meat production as a whole was 5,000,000,000 pounds greater in 1918 than THE FAEM IN FOREIGN TEADE 23 in 1900. The actual production was 23,366,000,000 pounds. 1 What might be called the guaranteed inducement for this increase in the cereals and in live stock and beef products was the act of Congress of August 10, 1917, empowering the President to fix a reasonable price for wheat, — and supplemental legislation in connection with food supplies for the Allies. The guaranteed price fixed for the wheat crop of 1917 was $2.20 per bushel, and $2.26 per bushel for that of 1918 and 1919. Before this legislation had been enacted and before the United States became a belligerent, the incentive had been the lessened production in large areas on account of the war, and the fixed and definite needs which it was known would have to be supplied for the Allies. This war-time production is a true measure of the possibilities of American agriculture in foreign trade. Wheat is the world's great competitive food product, and wheat exports in the form of grain and flour have been of inestimable value to the American farmer. On •the basis of one hundred million inhabitants, the United States required annually 650,000,000 bushels of wheat for consumption and for seeding. The five-year average up to 1917 was 728,000,000 bushels. This included the bumper crop of 1915, which was in excess of 1,000,000,- 000 bushels, and the shortage which affected the winter- wheat crop of 1917. It is of no economic consequence that during the early war period exports ranged from 240,000,000 to 332,000,000 bushels annually. Regard- less of war conditions, there is an average of production i These and other statistics are taken from the "Agricultural Year Book," and from the report of the Secretary of Agriculture for 1918. 24 AMERICAN FOREIGN TRADE and consumption in the United States, with a normal surplus for export. The exports of wheat in ordinary times previous to the war were 105,000,000 bushels annually. According to the statement of the secretary of agriculture, this was a small fraction more than one bushel production per person in the United States. The economic proposi- tion, therefore, is to keep the wheat production moving with the growth in population so that there may be an average surplus of one bushel per capita for export left over from domestic consumption. With the constantly increasing efficiency in production, through the coopera- tion of the wheat-grower with the governmental and state agencies, there is no ground for assuming that this surplus cannot be kept up. The proportion of wheat manufactured into flour for export also should be main- tained. It would be as great folly to discourage exports of flour as to discourage wheat exports. Corn, it has been said, is the great American farm crop, and an average annual production approximating 3,000,000,000 bushels justifies this statement; but it is further said that corn is not an export crop, since the quantities shipped abroad rarely exceed two per cent, of the total production, and in some years fall below one per cent. It might be observed that the exportation of 50,000,000 bushels of corn, valued at $30,000,000, as was the case in 1915, is not a negligible item in the pros- perity which foreign trade brings to the American farmer. But the production of corn is not to be con- sidered solely with reference to its exportation in its primary form. Years ago, when James Wilson taught the farmers of Iowa the increased value of their corn crop if turned THE FARM IN FOREIGN TRADE 25 into hogs, he demonstrated its worth not only in domestic trade, but also in foreign commerce. The State of Iowa raises approximately 10,000,000 swine annually, and one of the principal sources of its prosperity is pork products. The lard that goes to the West Indies and Peru, the bacon and ham that go to Cuba and Brazil, and the sundry other meat products are all essential factors in Iowa's prosperity. There has been no de- crease in the number of swine in the United States. On the contrary, the number increased from 58,185,000 in 1910, to 67,453,000 in 1917. While the increase is not proportionate to the growth in population, there is no marked disproportion. What is true of hog products is true of other meat products. For several years cattle-raising was station- ary, and it was feared that through the breaking up of the big ranches in the West there would be a permanent decrease in production; but the farmers began to raise more cattle on the farm when they became satisfied that this could be done profitably. In consequence, in 1917 there were 63,617,000 head of cattle, including milch cows, as against 61,803,000 in 1910. 1 Study of all these agricultural products shows clearly that the United States can produce them in quantities more than sufficient for the needs of its own people even though, as with meats, the per capita consumption in- creases. One year it may have a considerable excess of wheat. Another year the corn, or maize, although rela- i The Department of Agriculture, in the statistics of farm animals, estimates 45,500,000 cattle other than milch cows in 1901, and the variations in the intervening period are upward to 35,855,000 in 1914. In 1907 the price per head on the farm was $17.10; in 1911, $20.54; in 1917, $35.88. The lowest price since 1900 was $15.15 in 1905, when there were 43,669,000 head. 26 AMERICAN FOREIGN TRADE tively a small percentage of the crop is exported, may add appreciably to the price obtained abroad for the yield of American agriculture. Again, it may be that the tobacco crop will prove unusually large, or the prices unusually good. Occasionally, there may be a surplus of meat products. Dairy produce may be the next com- modity of which considerable quantities can be spared. Taken with cotton, they go to form a varied list of exports, and in the variety is the certainty that every year the grain-fields and the cotton-plantations con- tribute to the value of American foreign trade. Cotton is a farm product because the plantation is only a huge farm. It ranks second in value among the crops of the United States. It is the most important commercial crop. Approximately three fifths of the world's cotton is produced in the Southern States. The production has increased since 1840 at a rate somewhat greater than the population. 1 Until the beginning of the Great War the proportion of the product exported ranged between sixty-five and seventy per cent, of the total production. It might be desirable to use a larger portion of the raw cotton in the domestic mills and to send it abroad in the form of manufactured goods ; but this process is going on slowly, and cannot be hastened by artificial means. Assuming that a larger percentage gradually will be utilized in this manner, the United States always will have an enormous quantity for export. Cotton is the greatest raw asset in foreign trade. A question which obtrudes itself is whether competi- tive production in other countries will reduce the de- i " Geography of the World's Agriculture," Department of Agricul- ture, Washington, 1917. THE FAEM IN FOEEIGN TEADE 27 mand for American cotton. To answer this question, a brief survey of the cotton areas of the world is suffi- cient. After the United States come India, Egypt, and the Eussia that was. In the Southern Continent the principal producer is Brazil, which in some years approximates 500,000 bales. Other widely scattered regions — Japan, China, British Africa, British West Indies, the Dutch East Indies — produce relatively small quantities. For years the Lancashire mills have had a settled policy of making themselves, if not independent, at least less dependent, on the cotton-fields of the United States. They have encouraged the growing of the staple in all of the tropical British dependencies. They have been supported in this experiment by the Imperial Gov- ernment and by the various colonial governments. The result has not been encouraging. Egypt is one of the most valuable sources of supply under the British flag. Under the system of irrigation by which the waters of the Mle have been rendered more tractable, the cotton area has been extended until the limit has been reached. Egyptian cotton is wanted by all the world, including the United States, since it is necessary in mixing with the coarser fibers; but even though the supply were to be monopolized by Great Britain, the Lancashire mills would still lack the bulk of the raw material required. The Egyptian cultivation has been extended to the Sudan. The soil there is suitable, but the main ques- tion is one of labor, and the Sudanese do not take kindly to field labor. The black Mohammedan finds that his wives and his concubines are able to support him with- out contributing their energies to the cotton-field, while 28 AMERICAN FOREIGN TRADE he himself disdains the status of an agricultural laborer. The experts who studied the soil of the Sudan for the British Government were competent, and their conclu- sions as to its suitability were correct ; but they took no account of the labor question. The cotton production of the Sudan does not exceed 10,000 bales a year, fewer than a single section in Georgia. India cotton has shown little improvement in quality through half a century, notwithstanding all the efforts to better it. Nor has the area, even under irrigation, materially increased. India cotton, Surat, is still es- sential to Manchester, but only for mixing with Ameri- can cotton. The Lancashire spinner who during the Civil War interjected into a prayer for more cotton the ejaculation, " Yes, O Lord, but not Surat," could repeat that invocation to-day. Finally, there are the British tropical colonies, the Leeward Islands and others of the West India posses- sions; Cyprus, in the Mediterranean; and the African dependencies. Their total production does not equal that of half a dozen counties in South Carolina. Russian territory is the most promising source of in- creased cotton production outside of the United States. The cotton area is situated in Turkestan, or central Asia, and in Transcaucasia. Extensive irrigation is required in Turkestan, and the increase in the cultivatable area is slow. It will be years before Russia will produce 2,000,- 000 bales of cotton. There remain the areas which, in the judgment of cotton-growers, are suitable for cultivation, but which are yet unexploited. Asia Minor is the principal one of these regions. The possibility of turning it into a huge cotton-field was one of the motives of Germany's eco- THE FARM IN FOREIGN TRADE 29 nomic penetration into Asiatic Turkey. Yet even had Germany's ambition been realized, she could not have raised enough cotton in Asia Minor to supply her own wants. Expert investigation has shown that the crop which ultimately might be produced at the most would barely equal the production of the State of Mississippi in normal years. Mississippi's production is 1,000,000 to 1,500,000 bales per year. The conclusion is clear that cotton will continue in- definitely to be the dominant factor in the export trade of the United States that is dependent on agricultural production. Approximately, it means half a billion dollars annually. With the certainty that the United States will con- tinue to produce wheat and other cereal crops and cotton in excess of its own needs, and that there will be some excess of live-stock products over the domestic con- sumption, the importance of the farm and the cotton plantation in international commerce becomes clear. It is in the variety of these products that lies the reason for treating them as an essential element of foreign trade. A pertinent illustration of the reflex influence of the agricultural crops on domestic prosperity when marketed abroad is found in an official report made be- fore the United States became a belligerent. Two things have occurred since the beginning of the European war that have awakened a lively interest in foreign trade in certain parts of this country where heretofore there had been little or no interest in commerce of that character, or in matters of international importance. Upon the out- break of the European war the price of cotton declined enormously. It declined to a point probably below the bare 30 AMERICAN FOREIGN TRADE cost of production, and thousands of planters in one entire section of our country found themselves not only deprived of their profits but actually facing financial ruin. Merchants and banks, that had extended credits to the growers of cotton, were confronted by an equally serious condition. The whole situation had been brought about merely because a part of the European market for cotton had suddenly been cut off. And every intelligent grower of cotton, every well-informed merchant and banker, in those districts where cotton is the staple crop, suddenly realized what foreign trade and an ex- port market meant to them. During the same period, but perhaps with not quite the same suddenness, another great section of the country, the wheat-producing belt, found itself in the midst of unpre- cedented prosperity. In spite of the fact that a bumper crop — the largest in the history of the United States — had been harvested prices went to levels heretofore unknown. And this again simply because some of the great wheat producing sections of the world had suddenly been cut off from their usual markets in western Europe, and the demand for Ameri- can products consequently increased, and the western farmer, the grower of wheat, the merchant and the banker in that part of the country, found out, as never before, how important foreign trade was to them. 1 Agriculture is the greatest of the resources of recon- struction following any war. Basic production pro- ceeds more rapidly than with industrial rehabilitation. German thoroughness in devastating the part of France that was occupied was unparalleled in its systematic and scientific fiendishness. It made early rehabilitation of that region impracticable, and by that much reduced the reproductive capacity of the French soil for several years. But this agricultural area was relatively a small one in relation to the world's agriculture. i Report of Dr. E. E. Pratt, Chief of Bureau of Foreign and Domestic Commerce, 1916. THE FAEM IN FOREIGN TRADE 31 Other war areas which suffered some destruction will be rendered reproductive sooner, because this was the ordinary military destruction and not the calculated scientific destruction. Still other areas, such as the disturbed portions of Russia, prove a substantial sub- traction from normal productiveness. Outside of Russia and central Europe, the great pro- ductive regions of the world, those of the United States, of Canada, India, Australia, and South America, suf- fered no interference. Instead, they enjoyed the stimu- lus of highly profitable markets for agricultural products. The effect of the war measures taken by the various European governments for stimulating agricultural pro- duction cannot be determined at once. Yet it may be generally assumed that some advance has been made, although European agriculture is the systematized out- growth of centuries and does not offer a wide field for further improvement. In the United States the effect of the measures taken is likely to be more than tempo- rary. Cooperation in feeding the Allies, through a sav- ing in home consumption and by the conservation of food-stuffs, through enhanced production, and through distribution regulated systematically, affords the lesson for the future. If a larger surplus of agricultural products could be assured through these methods dur- ing the war, as was done, it can be assured for a long period after the war. The production of one bushel of wheat per person in the United States in excess of the home consumption may be taken as the general measure of what may be done. The supplying of other countries with this surplus production is the function of the Amer- ican farm in foreign trade. It is for the new agricul- 32 AMERICAN FOREIGN TRADE ture to demonstrate the national efficiency in this field. The American farmer is assured the cooperation of other governments in providing the information es- sential to raising crops. He no longer has to guess what may be happening to the harvest in some other part of the world, although it will have an important influence on his own crops. The International Institute of Agri- culture, with headquarters at Rome, is the principal one of these agencies of information. His own Government provides the American farmer with something more than information about the crops. It seeks to advise him regarding the markets for them and to assist him in the actual marketing. The De- partment of Agriculture expanded its domestic field by establishing market bureaus abroad. It did what other departments were doing for marketing manufactured products. The prospect before him in every way is an encouraging one. CHAPTER III MACHINERY AND NATIONALIZED EFFICIENCY Standardizing European methods — England's progress in scientific effectiveness — American individualized efficiency — Machinery's place in industrialism — Development of productive power — Decrease of handicraft — Monotony of machine craft — Welfare projects — Prohi- bition as an economic element — England's drink problem — The in- dustrial woman of the world — Status in the United Kingdom — Posi- tion in the United States — A world reserve factor in production. ENGLAND'S nationalized industrial organization is the world trade factor of to-morrow. Ger- many's monarchically socialized system of pro- duction and distribution is the experience of yesterday. America's individualized efficiency is the realization of yesterday and the prospect of to-morrow. France's in- dustrial reorganization is the hope of the future. What passed with the passing of arms and what remains, what lasting changes in economic systems may come out of nationalized activities, can be determined in some degree by a resume of the measures that were adopted for na- tionalizing the individual factors in trade and industry, finance and transportation, in order to make them more efficient war machines. The British motive, in its immediate phase, was by increasing productivity to overcome the devastation caused by war. Science was brought into more inti- mate touch with industry by the closer association that was established between the laboratory and the factory. 33 34 AMERICAN FOREIGN TRADE Various research bodies, such as the General Advisory Council, with its standing committees on engineering, metallurgy, and mining, and the Chemical Advisory Council cooperated with the Government in the primary investigation for the speeding up of industry. That their work assured permanently greater productive ca- pacity and greater economy in production may be ac- cepted without cataloguing the several activities. The field of accomplishment is too broad for detailed survey. In rapid review it may be said that musty factory traditions disappeared, that collective efficiency supplanted them, that the use of automatic machinery became the means of quantitative production, that in- dustrial chemistry made striking advances as evidenced by an increased productiveness of fifteen hundred per cent, for sulphuric acid, and that all processes of pro- duction were improved until they approximated the scientific effectiveness which is the ultimate economic factor. In its widest sense it may be said that British industrial productiveness was standardized. When American enterprise, in the form of an American match company, in one of its militant moods, obtained control of its English competitor, the conservative Britons gasped at the swiftness with which the whole plant and its expensive equipment were scrapped in order that modernized machinery might be installed. The hand had given way to the machine in making sulphur matches, and the crude and heavy appliances in use by the English manufacturers were discarded overnight for standardized match-making machinery. Such an instance would now be no cause of astonishment. The standardization which was so marked a feature of NATIONALIZED EFFICIENCY 35 the military methods, nevertheless, was not wholly a consequence of the war. It was more the swift develop- ment of processes upon which Europe already had en- tered. Before hostilities opened, European countries had begun to compete with the United States in the use of improved machinery. Germany, quick to appropriate and apply the inventions of others, had placed her basic industries on what was essentially an American machin- ery foundation. In the case of machine tools she had paid a high price for the privilege of transferring bodily an American machine-tool industry, something in which the United States admittedly led the world. France was transforming her artistic manufactures into greater productiveness through the adoption of improved me- chanical appliances and the integration of factory plants. England, while foremost in the manufacture of textile and other forms of machinery with which to equip foreign industrial plants, was laggard in respect to some of her own industries ; but she was awakening. Standardization in the United States had been an illustration of individualized rather than of nationalized efficiency. It had come to be the matter-of-course factor in all phases of industrial production. Along with it was the efficiency developed in the single factory and the efficiency obtained through the integration of groups of factory plants. Efficiency experts and efficiency en- gineers, to men actually engaged in industry, had become a byword. It was said humorously that they caused no real loss, and that the plant which employed them con- tinued to produce about as cheaply as before they took temporary charge of it. This was the American way of confessing reaction from exaggerated expectations, but there was no disposition to deny the economies effected 36 AMERICAN FOREIGN TRADE by the Taylor System. The total of separate factories in which these economies were realized made an appreci- able contribution to the national efficiency in production. Imperious war necessities showed deficiencies in the means of mobilizing industry, but not in the effectiveness of their production. The initiative faculty, which is the dominant American characteristic, never was brought out more strongly. Standardization made further advances. Industrial chemistry literally leaped forward, so that toxic war gases, as an illustration, be- came an instrument of peaceful industry as soon as the war was ended. From the experience of England and the other Euro- pean belligerents, and from the example of the United States, the conclusion is drawn that in peace activities machinery occupies a more advanced place in produc- tion. The Great War merely pushed forward and made more general industrial processes that already were in operation. It gave affirmative evidence that the char- acteristic feature of modern industrialism is quantity production. Ferrero, the Italian historian, who has reveled in comparing the industrialism of the United States with the civilization of Rome, in an imaginative sentence de- scribes the hand of man as a living and mind-inspired machine. Yet the hand, as the instrument of industrial progress, however beautiful its manifestations may be, slackens and withers before the multiple mechanism which the human brain has devised. The hand loom of India, once the sustaining force of a vast population, in vain seeks rehabilitation in a nationalistic revival of the spirit of India. The loom is gone, and with it other cottage employments. The NATIONALIZED EFFICIENCY 37 textile industry of the Hindus nevertheless becomes an important element of national progress, because the cot- ton mill, in replacing the hand loom, has vastly increased productiveness. The blacksmith's forge and the simple foundry the world over are absorbed by machine-driven iron and steel mills. The development of productive power in modern so- ciety through the use of machinery is a fascinating theme and enters into the realm of imaginative economics. Nearly a century ago Henry Clay, in advocating the policy of protection, gave this illustration of industrial progress in England : The combined force of machinery employed in manufactur- ing in the United States equals the labor of how many men 1 In 1820 in Great Britain it equaled the labor of one million men. The aggregate labor of individuals employed equals the united labor of two million. The machine labor is to manual labor as one hundred to two. Ealph Waldo Emerson, a third of a century after Henry Clay, said that the power of machinery in the mills of Great Britain had been computed to be equal to six hundred million men, one man being able, by the aid of stean,, to do the work which required two hundred and fifty men to accomplish fifty years earlier. Michael Chevalier, the French economist, in his " Course of Political Economy," in 1841, made these es- timates : Manufactures "of iron increase in productive power in five years as one to twenty-five or thirty; flour, since Homer's day, one to one hundred and forty-four; cotton fabrics in seventy years as one to three thousand three hundred and twenty. America, in transportation of goods, as one to eleven thousand five hundred. 38 AMERICAN FOREIGN TRADE This is a striking view of what one man could do in the Homeric era, and what one man could accomplish towards the middle of the nineteenth century with all the facilities of production that had then been devised. The development of productiveness through machinery and standardization in the last seventy-five years makes Chevalier's estimate almost a medieval one. It is in the United States that in the past the use of machinery has been the most daring and most far- reaching in its influence on economic development. The census of hand-made goods taken from time to time is the living evidence of this development. But henceforth the United States is not to be on a much higher plane than other countries in the use of machinery. It will have to meet conditions that they have to meet. Meditative and moralizing economists voice their re- gret over the loss to the artistic side of civilization through this use of machinery, but the endless process goes on from handicraft to machine craft, through the temporary distress of workers caused by loss of employ- ment due to labor-saving machinery, until there is the widened employment resulting from labor-making ma- chinery. The moralizing economists however when they deplore the depressing influence of the monotony of machine labor on the human organism, have a case in court which is not argued away by the mere citation of physical comforts through increased productiveness. There are subtractive factors which lessen the value of machine production. The principal one is the reac- tion of the monotony of machine labor on the individual worker, and the worker's discontent merging into group discontent and reacting in social unrest. The war has advanced the status of machinery in productiveness, NATIONALIZED EFFICIENCY 39 and as an element of the efficiency of the several coun- tries also has accentuated the inevitable condition which goes with it. Fortunately, there has been recognition of the need of meeting these conditions. On the part of corporations and individual employers it has come in the definite measures for recreation, for social betterment, and for disassociating the laborer from the monotony of his daily life. On the part of governments it has germinated new plans for regulating the conditions of labor and has given fresh impetus to half-considered and only partly effective policies of the past in relation to bettering the conditions of actual em- ployment. Insurance for the sick and against unem- ployment, old-age pensions, workmen's compensation and employers' liability laws, and a whole series of welfare laws have their roots in the desire to insure the mind as well as the body of the laborer against distress. The theory is that if his mind be taken off the monotony of the daily grind, both mind and body will be healthful. Great Britain, as a supplemental means of national- ized efficiency, has taken the leadership in these measures, especially in provisions for housing the work- ers and for safeguarding their health. This in reality is safeguarding the national health. If the measures become as effective as hoped, they will place England on something like an equality with the United States. There are interrogatory signals, however, in these measures of nationalized efficiency. One is a beckon- ing inquiry as to the drink habit. No one who has been in a British industrial section — Birmingham or Sheffield on a Saturday night, or the Potteries on a Monday morning — can doubt the economic effect of the drink habit on the .efficiency of a manufacturing 40 AMEKICAN FOKEIGN TKADE country such as Great Britain. The war enabled some progress in temperance to be made. Strict control of the liquor traffic as a part of the Defense of the Kealm Act proved more effective than the advocacy of temper- ance legislation on moral grounds had proved in peace- times. During peace, tradition, vested rights, personal lib- erty, all made the extension of governmental authority, in lowering the consumption of alcoholic liquors, an exceedingly difficult problem for whatever ministry was courageous enough to attempt its solution. The Liberal Ministry of Asquith and Lloyd George in 1908 and 1909 found how great the difficulty was in securing the enact- ment of very moderate measures to reduce the number of public houses and limit the evil of women drinking in public places. Nor did the example of royalty permeate, as in many other instances, through the aristocracy and the middle classes down to the working classes. King George, at the outbreak of hostilities, announced the abstinence of the royal family from liquors ; but the royal example was not widely followed. What was accomplished was through direct governmental action. This was partly based on the necessity of conserving the materials of beverages for war uses. There was an actual decrease in consumption. 1 The United Kingdom's annual drink bill, or the sta- tistics of the number of gallons of beer and whisky con- i The total consumption of absolute alcohol in 1917 was approxi- mately 45,000,000 gallons, as compared with 73,000,000 in 1916, 81,- 000,000 in 1915, 89,000,000 in 1914, and 92,000,000 in 1913. Of this quantity 73.6 per cent, was consumed as beer, 23.6 per cent, as spirits, and 2.8 per cent, as wine. — Report of George B. Wilson, Secretary of The United Kingdom Alliance. NATIONALIZED EFFICIENCY 41 sumed yearly lay each person, was far from telling the full story of the effect on industrial production. In the same way the figures showing decreased consump- tion during and following the war may not tell the full tale of the labor effectiveness. But it was unquestion- ably a more sober industrial England that emerged from the war. The United Kingdom must take note of what its principal industrial and commercial competitor does. The United States did not go on a prohibition footing as a direct consequence of the war. This only caused the pace to be accelerated. The advantage taken of war necessities by the prohibition advocates may have been unfair, but the result was obtained merely a few years earlier than it would have been achieved other- wise. What the war-prohibition legislation did was to accentuate that prohibition had acquired its irresistible force because of the recognition of its economic value. Moral suasion had done something toward diminish- ing drunkenness and the industrial inefficiency resulting therefrom. Advocated through three quarters of a cen- tury, it had done little more than this. When the vast waste caused by alcohol came to be recognized, when manufacturing corporations and labor organizations be- gan to advocate prohibition on economic grounds, the movement gained rapid headway. It may be that those who believed in the prohibition of whisky and in the indulgence in beer and light wines were sound in their arguments, but these arguments proved unconvincing to the majority of people in the United States. Pro- hibition is because this majority realizes its economic value. The damp climate of England may prove a sufficient argument for state control of the liquor in- 42 AMERICAN FOREIGN TRADE dustry in the United Kingdom rather than for outright prohibition, but this, too, will be an admitted factor in diminishing the drink habit, or else it will not prevail as a policy. It must justify itself as a means of in- creasing productiveness, as a measure of nationalizing the efficiency of the British working-man. 1 Common to all the fighting nations was the woman worker. Thus was evolved the industrial woman of the world. Following the war, the question arises, Has there developed the woman artisan as a new factor in production; and if so, what will be her relation to the efficiency in the productiveness of the nation? The thought in the background is that women must be taken on a parallel with the efficiency of men workers. The women coal-heavers of Shanghai or Port Said or Jamaica, who fill the ship-bunkers, do not think that their work is a prerogative of the male sex. The women burden-bearers of Tibet, who carry heavy loads up the steep mountain-passes, do not look on that work as masculine. The Indian women of Tehuantepec, who take to themselves the major part of the physical labor, have no conception that there is anything unique in their occupation. The business women in France never have allowed it to be assumed that they were usurping the places of men. No more have the business women and the stenographers and typists in the United States per- mitted such an assumption. By a gradual process it had come to be taken as a matter of course that dress- making, millinery, and school teaching were not the only callings open to women. i For a discouraging view of the temperance prospects in the United Kingdom see "Reforming the Liquor Trade in Great Britain," by a British Liberal, Atlantic Monthly, June, 1919. NATIONALIZED EFFICIENCY 43 The war made some changes and caused innovations startling to ossified communities. In England and in the Continental countries, after hostilities began, there was an increase in the number of women employed in field labor, but there was nothing novel about this labor, especially on the Continent. When women tram-con- ductors and mail-carriers appeared in Nottingham, Leeds, and Bradford, it was a matter of passing wonder, for those were the early days of the war. But women conductors had been employed for years on the tramways of Santiago and Valparaiso in Chile, and many women were already licensed taxicab-drivers in Paris. In the United States the appearance of women as conductors on the street railways merely caused the quick addition of a new word, conductorette, to the popular vocabulary. The permanence, or temporariness, of these occupa- tions has little economic significance. The real ques- tion relates to the evolution of the industrial woman of the world through employment in the munitions fac- tories and in kindred industries. Within a few months after the war began the work in the munitions factories of England had been so standardized that it did not differ greatly from work in the textile factories, in which women always had been employed. In 1918, the high pressure period, there were 1,250,000 women replacing men in the industrial organization in the United King- dom, and of these 800,000 were munitions workers. In the early stage of the war political economy took rather doleful note of the psychological effect of this sudden increase of women in employment, and also took notice of the effect on the national spending habit. The cockney woman, whose quick wealth of wages went for new hats and dresses and all sorts of feminine finery, 44 AMERICAN FOREIGN TRADE instead of going into the postal savings-bank, caused grave apprehensions. Political economy could not see in these extravagances the starved soul struggling to the light. But gradually this situation adjusted itself. The woman munition-worker became a factor in con- sumption and production with living expenses just like the man worker. In the third year of the war a summary of an authori- tative character was made regarding the industrial posi- tion of women in the United Kingdom. It was noted that the process of relaxing trade-union restrictions which interfered with the employment of women had gone on at an accelerated rate; that they had entered innumerable occupations theretofore closed to them, for many of which they were supposed to be unfitted, but in which they were making good. It was also noted that in industrial occupations where physical strength was required they were at a disadvantage, and that in the munitions trades operations had been subdivided, and that a woman did only one, or at the most two or three parts of a process, instead of performing the whole complex operation. In this subdivided work they had attained great efficiency, and had proved that they had inherent ability to handle skillfully tools and ma- chinery. 1 In the United States no census of employed women was made during the war. Following the armistice, it was estimated by the United States Employment Bureau that there were 12,500,000 women at work in industries; that is, females in gainful occupations ten i " Effect of the War upon the Employment of Women in Eng- land," by Mary Conyngton, Monthly Review of the U. S. Bureau of Labor Statistics, April, 1918. NATIONALIZED EFFICIENCY 45 years of age and over, without regard to those who en- tered industry because of temporary war conditions. Scattered evidence was said to indicate that the number was much smaller than was generally supposed, and that large numbers of women employed in the war in- dustries had been transferred from other occupations. It was assumed that after the war most of these women would naturally go back to their old trades. The same authority quoted an organization representing employ- ers to the effect that in the last twenty-five years the employment of women in manufacturing had increased more rapidly than that of men, and the opinion was ex- pressed that the expansion of their activities at this time may be regarded not as a radical innovation, but rather as an acceleration of a normal development. These observations would seem to put the industrial woman of the United States on a somewhat different footing from her sister in Europe, where the war needs did develop virtually a new class of industrial women workers who had been without previous experience in manufactures. The British Labor Mission which visited the United States after the war gave high testimony to the degree of efficiency of women industrial workers. The com- parative merits of men and women engaged in such lines as tool-making and delicate munition works calling for the utmost precision was summed up in this way: in fields where an all-around knowledge was required, and capacity for grasping many aspects of a problem, men still held preeminence ; but in many specialties requiring a high degree of efficiency in a restricted field women had shown themselves better able to withstand the monotony than men. 46 AMERICAN FOREIGN TRADE This testimony is especially important in view of the effect of monotony through the use of machinery on workers generally. It seems to assure that while the woman mechanic numerically may not immediately be- come an important factor in industrial production, she is a reserve industrial resource, and in the employments where adaptability to machinery is necessary she is likely to measure up to the requirements. It is prob- able that her increased participation in mechanical labor will give an impetus to welfare legislation, and in the sense that this influences efficiency in production, there will be increased productiveness. Yet, taking the in- dustrial nations of the world as a whole, it has not been demonstrated that the woman mechanic will displace the woman of the home, or that marriage and mother- hood will cease to be her function in the social organiza- tion. The industrial woman of the world, in the final determination, may be regarded as the great reserve factor in productiveness to be drawn on as the needs of industry may demand. Her employment means no lessening of the nationalized efficiency in any country. CHAPTER IV RAW MATERIALS Iron the blood of industrial nations — Ore resources of the world — Distribution in the United States — Coal reserves — Sources of man- ganese — Copper and other industrial metals — Petroleum as fuel — Where the oil-fields lie — Water-power as motive force — Raw materials of textiles — Great Britain's basis of iron and steel industries — Ge- ographical advantages — Points in competition with the United States — What Lorraine iron and Sarre coal mean to France. ""¥" RON," declared Richard Cobden, "is the blood of an I industrial nation." How this blood shall circulate JL is one of the forceful questions of the new indus- trial era. Food for industry is as essential as food for peoples. Its primary possession is the key to the future status of the several countries in their world trade. The world has more than one hundred and twenty- three billion tons of potential iron ore resources capable of conversion into more than fifty billion tons of iron. It has approximately twenty-two and a half billion tons in existing deposits more or less developed, the equiva- lent of approximately ten billion tons of raw iron. 1 The resounding statement that the United States has ore in reserve to last a thousand years is sufficiently satisfying, but is somewhat vague. More definite is the statement that it possesses nearly one fifth of these de- veloped ore deposits, or in excess of four billion two i " Iron Ore Resources of the World." An inquiry made upon the initiative of the executive committee of the Xlth International Geo- logical Congress, Stockholm, 1910. 47 48 AMERICAN FOREIGN TRADE hundred and fifty million tons, which is capable of conversion into two billion three hundred million tons of iron. The German Empire, as it was constituted at the beginning of the Great War, with Luxemburg in- cluded, had a fraction less than three billion nine hun- dred million ore tons, equivalent to one billion three hundred sixty million tons of raw iron. France, as then made up geographically, had three billion three hundred million tons of ore, equal to one billion one hundred and forty million tons of iron. The United Kingdom has one billion three hundred million tons of ore, capable of conversion into four hundred and fifty- five million tons of iron. Spain has seven hundred and eleven million tons of ore, equivalent to three hundred and fifty million tons of iron. In the New World, Cuba and Newfoundland are minor reserves. The ore-beds of Brazil and Chile in South America, while enormous, furnish only conjectures of their possibilities. China is the reserve for Asia. The Lake Superior region in years of average activity is drawn on for from eighty-one to eighty-five per cent, of the iron ore utilized in the domestic industries of the United States. In dull years the production drops below forty million tons, and in busy years as easily mounts to sixty-five million tons. The Southeastern States, from Maine to Alabama, provide from ten to fourteen per cent, of the normal production, and the Northeastern States a fraction under four per cent. The Rocky Mountain region and the Pacific slope pro- vide about one per cent. Thus it may be said that the iron ore resources, although unequally distributed, exist throughout the whole country. Coal reserves throughout the entire globe amount to EAW MATERIALS 49 considerably more than seven thousand billion tons. 1 The total world production annually during peace is a billion and a quarter tons. The United States produces approximately five hun- dred million tons. Its coal deposits may be ex- hausted in two hundred years, as alarmist scientists sometimes assert, or they may be conserved to last five hundred years; but so far as the vision of man extends, their prospective life is sufficient to convert iron ore into iron and steel products until other fuel is found to replace them. The industrial area between Pitts- burgh and Cleveland is the story of the meeting of the iron ore of the Great Lakes with the coal of Ohio, West Virginia, and Pennsylvania. Birmingham's smoky at- mosphere tells where the ore and coal lie in twin beds. Colorado's iron and steel industry is the chapter which describes the advantageous assemblage of the ore and coal of the Rocky Mountain region. The vast variety of iron and steel products, which are the hall-mark of industrial progress in this era of international com- merce, therefore find the United States fully supplied with the two principal primary elements that enter into their production. There are also supplemental sources of supply. United States capitalists control the Cuban ore-fields, and draw on them as needed. Newfoundland's iron ore deposits likewise are available. Chile's iron-beds have been opened by American capital, and are now sup- plying blast-furnaces in Pennsylvania and Maryland. When the time comes that Brazil's ore reserves are needed they are as accessible to the United States as i Toronto Geological Congress, 1912. The exact figures in the mono- graph on this subject were 7,397,533,000,000 tons. 50 AMERICAN FOREIGN TRADE to Europe. Such small quantities of Swedish ore and of Spanish ore as are wanted are easily obtained, but the United States could draw exclusively on the ore deposits of the New World, and its iron and steel in- dustry be absolutely independent of Europe. This is shown in the sources of manganese. This es- sential element is to be obtained from Brazil in quanti- ties sufficient to render that from the Caucasus and from India secondary, as has been demonstrated during the war. The Caucasian region of Russia is good for an annual production ranging from 1,000,000 to 1,500,000 tons. India may reach 1,000,000 tons under the in- centive of extraordinary demand, but an average pro- duction of 600,000 tons is all that may be looked for in normal circumstances. The Brazilian production in- creased from 150,000 tons in 1913 to 400,000 tons in 1917. It is capable of much greater increase. In supplying iron and steel products in world trade, the United States, therefore, is not confronted with peril from lack of raw materials. The question is, instead, one that relates to the conditions of competition with Europe in the home market and in neutral territory. Some shifting of the domestic industries from one local- ity to another may occur, due to the relative proportion of fuel and freight charges. But America's share in the iron and steel trade of the world as a whole will be regulated principally by conditions in the Pittsburgh district, with freight charges to the seaboard having a marked influence in determining prices at which the products may be sold in foreign countries. In the wide range of the newer industries that are controlling factors in world trade, copper, after iron ore, enters more largely into manufactured articles than RAW MATERIALS 51 does any other raw material. The normal world pro- duction is in excess of a million long tons, and of this quantity the United States supplies more than one half. In 1913, before the war, the total world production was two billion two hundred million pounds, and of this amount the United States produced one billion two hun- dred and twenty-five million pounds. The production is more than enough for use in the electrical and other industries, and leaves a surplus for export; but there is an economic convenience in exporting part of the domestic product and in importing copper from other countries. Copper ore reserves available to the United States are found in Mexico, in Canada, and in South America. The Mexican deposits, for the most part, lie close to the boundary-line, as in the State of Sonora, and may be regarded by the United States as domestic resources. Canada may be looked on in the same way as Mexico, since the mines of British Columbia are contiguous. The South American deposits are principally in Peru and Chile. The majority of the mines there are owned by North American capital. The bulk of the output finds a convenient transportation route through the Panama Canal. The zinc resources of the United States are abundant enough for all manufacturing purposes. From 1911 to 1915 the production increased from 272,000 to 458,000 short tons yearly. An annual output of half a million tons is easily obtained, provided the demand requires it. Lead exceeds 500,000 tons of annual production. The output rose from 392,000 tons in 1911 to 507,000 tons in 1915. The reserve resources of lead are extensive. Tin is one of the minerals for which the United States 52 AMERICAN FOREIGN TRADE must look to other countries. "When American capital- ists erected large smelters on the New Jersey coast they forgot about the tin-plate industry in England. They had looked to the Malay Straits Settlement for their raw material, but the British manufacturers persuaded the Straits Government to put an export tax on tin exported to countries not in the British Empire. Con- sequently, the New Jersey smelters remained idle until the Great War. Then an arrangement was made by which the raw material was obtained from Bolivia, and the smelters were put into operation. The Bolivian Government imposes an export tax, but it is not dis- criminatory. Bolivia produces one fifth of the world's tin. The future of petroleum as fuel is not fully deter- mined, but the tendency is to increase its use for in- dustrial purposes. The United States to-day is the greatest producer of oil in the world, having far out- stripped Russia. Mineral oils furnish one of the prin- cipal export commodities. Should there be a strong demand for the consumption of larger quantities of fuel oil in the United States, the exports, through economic causes, would be reduced automatically. The setting aside of extensive oil areas by the United States Gov- ernment as naval reserves, and the tendency of naval authorities to exaggerate the claims of the Navy of the future, by establishing a government monopoly, though an industrial drawback is not likely seriously to inter- fere with production. Oil is a raw resource of great value to industries, and while the needs of the Navy will not be neglected, there is no reason to suppose that public policy will permit large productive areas to be reserved indefinitely. RAW MATERIALS 53 The petroleum production of the United States, since 1911, has ranged from 220,500,000 barrels upward. Be- fore the entrance of the United States into the Great War the Navy Department had made an estimate of its needs, based on the change from coal-burning to oil- burning boilers, and the impracticability of changing back from oil to coal. The experience of war demon- strated the utility of oil as power and speed for the battle-cruisers, and also afforded some criterion of what are likely to be the real needs in the future. The posi- tion taken by the Navy Department has been that the oil resources on the public lands should be kept as a reserve, and the Government, in furtherance of this view, from time to time has set aside naval reserves in Cali- fornia, Utah, Colorado, and Wyoming. It is still a de- batable question how much petroleum should be kept out of commercial and industrial use for naval reserve pur- poses; but with the power of the Government to com- mandeer oil supplies during war, this matter does not seem incapable of solution. The real problem was thought to be whether the pe- troleum supply is in danger not of exhaustion, but of absorption in one form of industry, namely, gasolene for automobiles. Improved methods of manufacture; new discoveries, such as the Rittman Process ; the possibility of combining benzol and alcohol ; the prospect of using industrial alcohol in the working of internal-combus- tion engines, and the abundant sources from which this product may be obtained — all afford relief from the fear that the United States may fall back in its manu- facturing development through lack of petroleum for fuel. Moreover, it has the Mexican oil-fields at Tampico to depend on as auxiliary sources of supply. 54 AMERICAN FOREIGN TRADE The greatest means of relief, however, was a war de- velopment. It was the advance made in the use of in- dustrial alcohol as fuel by providing alcogas, a substi- tute, for gasolene. The full value of this substitute may not be realized for many years, but there is no question that it possesses a real fuel value. Reduced to statistics, which are estimates and not scientific propositions, the petroleum resources of the world are approximately one billion six hundred million metric tons, with possible reserves of three billion one hundred million metric tons. This brings the total pe- troleum deposits up to five billion seven hundred million metric tons. The United States has a probable posses- sion of nine hundred and thirty-seven million tons, of which probably six hundred and twenty-six million tons are available commercially. The possession of so large a proportion of the pe- troleum deposits does not, however, assure the United States predominance in this industry. During the war an official publication sounded a note of mild alarm over the possibility that the control of the world's supply would pass into foreign hands. It was, therefore, urged that the United States should take measures to insure itself full supplies. 1 Water-power transformed into electrical energy is another raw material, as much a raw fuel as coal, which the United States possesses in abundance. Modern industrial authorities are just beginning to es- timate economic efficiency in terms of boilers and en- gines, — that is of horse-power, — and that which may be obtained from the utilization of water-power is i " Petroleum Resources of the United States," by M. L. Requa, con- sulting engineer of the Bureau of Mines, Washington, 1916. RAW MATERIALS 55 placed on the same plane as that of the boilers and engines which are driven by steam from coal. When the German Army seized Belgium, and followed this seizure with the occupation of a large region of France, the military authorities acted on the knowledge that the index of the industrial activity of a country is found in the amount of horse-power employed as motive power and the number of boilers installed in manufacturing plants. A census was taken of the number of boilers and the horse-power in the area occupied by the German troops. Very little of this was developed from water- power, but the industrial engineers of the Allies, taking their cue, began to estimate how the water-power to be obtained from the Alps and the Apennines could make up for the lack of fuel from which Italy suffered. The development of this water-power proved a useful service in Italy's munition manufactures. A British economist, in a mid-war discussion of Great Britain's presumed industrial supremacy after the war, Md stress upon the horse-power of the British Empire, with special reference to water-power. 1 Canada is a principal source of this power. The es- timate is of approximately eighteen million water horse- power available in the dominion. According to the dominion Census Bureau there was in 1917 a total de- veloped water-power capacity of two million three hun- dred and five thousand horse-power. The United States, on the authority of the Geological Survey, has available sixty-one million six hundred and seventy-eight thousand water horse-power. In the con- gressional debates concerning the legislation for con- i" Britain's Coming Industrial Supremacy," by J. Ellis Barker, Nineteenth Century, October, 1916. 56 AMERICAN FOREIGN TRADE serving and utilizing this power, it was declared that all but five million three hundred thousand horse-power was running to waste. The truth is that the United States has a vast reserve of raw material in this potential hydro-electric energy, and that the water- power may fairly be classed with petroleum and coal as one of the primary elements of production. It has the additional advantage that it cannot be ex- ported except in the form of manufactured commodities for the production of which it has supplied the driving force. Eaw materials of textile industries are not the natural monopoly of any nation. The United States, with its preponderant cotton production, comes closer to a textile monopoly than any other country. In the matter of wool it can claim no such preponderance. Out of an average world production of two billion eight hundred million pounds of wool annually, the United States cannot account for more than three hundred and fifty million pounds. Moreover, there is the need of the coarser grade wools grown in other countries for mix- ture. However, the whole world is open to the United States as much as to other manufacturing nations. The woolen industry is not one of rapid or of ex- tensive development, and it is never likely to be a very prominent factor in the foreign trade; but in the fabrics which enter into the export trade of the world the United States at least has a basic supply of raw wool of its own production. During the war large quantities of South-American wool were absorbed for manufactur- ing purposes, and this absorption is not likely to cease. Great Britain's raw material resources are to be viewed not only as those of the United Kingdom, but as RAW MATERIALS 57 those of the British Empire. Nevertheless, geography interposes some obstacles which political ties cannot overcome. In the great basic raw resources of iron and coal the United Kingdom is to be analyzed with refer- ence to European geography, since the overseas colonies are deficient in these primary products, and if they were not, the transportation factor is in the way. The United Kingdom, according to the authority previously quoted, has one billion three hundred million tons of potential ore, equal to four hundred and fifty- five millions tons of raw iron. Approximately three hundred million tons of coal are mined annually. The geographical relation of the iron ore and coal deposits of the United Kingdom is the key to her iron and steel industries, to the shipbuilding at Newcastle, Glasgow, and Liverpool, to Birmingham's basic products, and to Sheffield's highly specialized articles. The soft ore of Sweden and the ore of Spain are easily accessible, and supplement the domestic supply. The manganese of India and of Brazil is as available for the United King- dom as for the United States. There is also the tin of Cornwall, supplemented, colonially, by that of Aus- tralia and the Malay Straits. The United Kingdom does not require to import a single ton of coal for her iron and steel and collateral industries. With the ores accessible, she has no fears of a lack of raw materials. So far as concerns the manufacture of these raw materials into finished and semi-finished articles, she is in a position at least as favorable as the United States. Andrew Carnegie, in his testimony before the Ways and Means Committee when the tariff legislation of 1909 was being formulated, declared that Great Britain 58 AMERICAN FOREIGN TRADE was badly situated in regard to iron-ore supplies, and that the country had reached the apex of her manu- facturing powers. According to him, Great Britain's iron-ore supplies were rapidly vanishing. This view was commented on at the time in England, and against it was cited a report of the Swedish Geo- logical Survey, which said that there were not fewer than a thousand million tons of iron ore left in the ex- isting workable ore-fields. England was then import- ing from one third to one half as much ore as she mined. Spain was the chief source of supply, and after that Sweden. Mr. Carnegie's prophecy was in substance that in six years England's iron- and steel-making resources would be as much impaired as would be those of the United States in a hundred years. The period fixed by Mr. Carnegie for this calamity ended in the midst of the Great War. England was then drawing tremendously on her iron-ore and coal resources for munitions-mak- ing, but the ore reserves gave no signs of impairment. A sanguine view of England's position, due to the possession of the raw materials which are the basis of iron and steel industries, was taken by a high-class technical journal in an article published at the threshold of 1918. 1 A condensation of this article was to the effect that the future supremacy in iron and steel and engineering export trade, which is the world's most important group of manufactures, is between the United States and the United Kingdom. In thirty years the world's per capita consumption of the group increased 150 per cent. The United States, Germany, and the United Kingdom sup- i Engineering, London, December 28, 1917. RAW MATERIALS 59 plied eighty-five per cent, of the world's iron and steel and engineering products. In the United States the iron ore is one thousand miles from the coal-mines, and the iron and steel works are from four hundred to five hundred miles from seaboard. British ore and coal areas are compact. Machinery on large scale produc- tion is a feature of the industry in the United States. The United Kingdom's great advantage is her coal and iron supplies, her manufacturing plants and shipping ports side by side, and her unique transport facilities. It is unquestionable that England can lay down her finished products for export at seaboard with smaller transportation charges than can the United States. Other factors enter into competitive sales in the world's markets, but in the means of assembling the raw ma- terials of the iron and steel industry and of placing the manufactured commodities afloat, it is touch and go be- tween the United Kingdom and the United States. England has no copper, and but little can be supplied from her colonies. The world's supply, however, is as open to her as it was to Germany, and she is in a posi- tion to develop her electrical industries, although in the past she has not done this to the degree of becoming a rival of Germany and the United States in copper products. In textiles the United Kingdom, as has been explained in a previous chapter, is not in a position to free herself from dependence on the raw cotton of the United States, notwithstanding India and Egypt. But the lack of this essential raw material is partly compensated by the development from generation to generation of skilled tex- tile workers. In the woolen industry England has both raw ma- 60 AMERICAN FOREIGN TRADE terials and inherited industrial capacity. Her own sheep furnish a not inconsiderable supply of raw wool, although the common impression is that England grows only mutton sheep. With Australia, and particularly New South Wales, India, and South Africa supplement- ing the domestic supply of wool, England can look with complacency on the efforts of other manufacturing coun- tries to obtain raw wool. Eighty per cent, of what she needs is grown under the British flag. France, as a consequence of the Great War, has come into her own as the mistress of the raw materials of iron and steel industry. With Lorraine regained, she has approximately five billion six hundred and thirty million tons of potential iron ore reserves. The produc- tion of the Lorraine districts that were held by Germany exceeded twenty-one million tons annually. The Longwy-Brie district, toward which the Teutonic claws were stretched in order to clutch an economic resource of incalculable value, produced approximately twenty mil- lion tons. Normandy and other parts of France added relatively two million tons. Taken with Lorraine, the French iron-ore production is normally forty-three mil- lion tons, with at least two million tons more available by easy transportation across the Mediterranean from Tunis and Algeria. This places France second only to the United States in the production of iron ore. This is an economic event of vast significance, although its full purport may not be made immediately discernible by the rapid development of iron and steel industry. This is because of the lack of workers. But the workers will come in time. French coal always has been an industrial deficit. Germany had the coal, and France in normal times was EAW MATEEIALS 61 compelled to import annually twenty-two million tons and upward. This deficiency is now cured. Lorraine is capable of a coal production of at least four million tons annually. The Sarre Basin, which henceforth eco- nomically is a part of France, means ample coal for French industries, though it is not of the best coking quality. The possession of these raw materials by England and France are an index of the future trade of the world. They are also a warning against over-confidence. They do not, however, diminish the knowledge that the United States possesses in abundance the primary raw materials which, turned into manufactured products, constitute the bulk of the world's commerce. CHAPTER V THE DIPLOMACY OF COMMERCE The shipwrecked Yankee skipper and mutual bargaining — The cele- brated Methuen Treaty — Objects sought by England and by Portugal — Adam Smith's objections — Disraeli's definition of trade diplomacy — ■ Palmerston on the qualities of negotiators — Tariffs modified by po- litical motives — Concessions by Japan and France to Great Britain — Commercial diplomacy in Europe in 1914 — Trade spheres and rap- prochements — After the war — Functions of trade diplomacy under the new conditions. ELDEELY readers may recall a droll chapter in James de Mille's " The Dodge Club." It is of a Yankee merchant shipmaster whose vessel, re- turning from Hong-Kong, is wrecked in mid-ocean. He keeps afloat on the carcass of a whale, where a passing New England vessel finds him comfortably quartered, philosophically awaiting a hail. The rescuing skipper boards the whale, and the shipwrecked merchant shows him over it as if it were a parcel of floating real estate. The shipwrecked merchant asks : " Would you like to buy a whale? " " Wa'al, yes, I don't mind. I am in that line myself." " What'll you give for it? " " What'll you take for it? " " What'll you give? " " Take? " "Give?" The dialogue continues in this manner for half an hour, the shipwrecked merchant remarking that he is fi?>. THE DIPLOMACY OF COMMEECE 63 waiting for a whaling-fleet to come along and pay him what his whale is worth, while the rescuing skipper ex- plains that this is not likely, since he is out of the course of the whalers. Then the bargaining comes closer to a trade. The skipper proffers twenty-five per cent, of the oil after it is barreled, barrels and all, and explains to the owner of the whale carcass that this is a mutually advantageous proffer, since it will save a voyage to both. It requires the exercise of diplomacy, but both finally agree that this is a mutually advantageous bargain, and the contract is closed. It is in accord with the formula of trade evolved by individual men trading in their pri- vate capacity. The diplomatic formula of trade intercourse be- tween nations was evolved when they began to regu- late their relations by treaties of amity and commerce, or commerce and navigation. With the development of their material resources, their economic policies be- came more distinctly molded by what they believed to be their national interests, and their commercial rela- tions became more intricate of solution on account of the necessity of reconciling and adjusting their interests to the interests of other nations. Trade relations of the European countries during the epoch when commercial enterprise began to adventure abroad were regulated on the assumption of securing benefits at the expense of non-participating countries. Colonial trade was so completely a monopoly of the mother country, and was so fully recognized as such, that it rarely entered into the negotiation of commercial treaties. The model of these conventions in the eight- eenth century was the celebrated Methuen Treaty, nego- tiated in 1703 by the British Minister of that name ac- 64 AMERICAN FOREIGN TRADE credited to Portugal. The text is blunt, and affords refreshingly frank reading in contrast with the stilted phraseology of ordinary treaties of friendship and com- merce, or of special commercial conventions, with their long preambles and their high-sounding declarations. Art. I. His Sacred Royal Majesty of Portugal, promises, both in his own name, and that of his successors, to admit, for- ever hereafter, into Portugal, the woolen cloths, and the rest of the woolen manufactures of the British, as was the custom, till they were prohibited by the law; nevertheless upon this condition : Akt. II. That is to say, that Her Sacred Royal Majesty of Great Britain shall, in her own name, and that of her suc- cessors, be obliged, forever hereafter to admit the wines of the grape of Portugal into Great Britain: so that at no time whether there shall be pe&ce or war between the kingdoms of Britain and Prance, anything more shall be demanded for these wines by the name of custom or duty, or by what- soever other title, directly or indirectly, whether they shall be imported into Great Britain in pipes or hogsheads, or other casks, than what shall be demanded for the like quantity or measure of French wine, deducting or abating a third part of the custom or duty. But if at any time this deduction or abatement of customs, which is to be made as aforesaid, shall in any manner be attempted and prejudiced, it shall be just and lawful for His Sacred Royal Majesty of Portugal, again to prohibit the woolen cloths, and the rest of the British woolen manufactures. There was a political purpose in this treaty. It was to strengthen the ties between England and Portugal, and the relationship thus established has continued to the present day. But the trade interest was the principal motive. Each country sought definite commercial advantages by means of an exclusive bargain to the specified disadvantage of ECONOMIC ALLIANCES 81 reason, have characterized it as the bulwark of protec- tion in accordance with nationalistic policies. It has been described as a device for lowering high tariffs, and, under the European practice, that undoubtedly has been the effect ; but there also has been the preliminary prac- tice of enacting high protective duties as the basis for concessions. The results of the general practice, how- ever, are more important than the claims of the contro- versalists. Under the unconditional interpretation of the favored-nation treatment, with frequent modifica- tions, the European nations in the course of half a cen- tury secured uniformity in commercial intercourse by developing a system of conventional tariffs. All the leading commercial nations with the exception of Great Britain, which was adhering to a purely revenue tariff, at the outbreak of the Great War had adopted the double tariff system on the basis of maximum and mini- mum schedules. Germany and France were the expo- nents of the different applications given to the sys- tem through these two sets of schedules. German policy assumed the expansion of exports as the primary and principal national necessity. It assumed com- parative safety from foreign competition. The French system, on the contrary, assumed primarily the neces- sity of defending and fomenting the national production, both agricultural and industrial, from foreign compe- tition. It looked only secondarily to the expansion of exports. In practice the French system was readjusted as a working measure through administrative methods. Germany's system had less flexibility, but under her policy fixity was more important than flexibility. Germany's conventional tariff system originated after the adoption of the Zollverein, or Customs Union, of the 82 AMERICAN FOREIGN TRADE several states in 1870. The Imperial German Govern- ment in 1879 concluded reciprocity treaties with seven European countries. The negotiations were conducted on the basis of the existing tariff, the schedules of which were reduced to the countries that entered into the treaties and automatically to those which were entitled to favored-nation treatment. The reduced tariff, being based on commercial conventions, was known as the con- ventional tariff, while the old tariff, which was not abro- gated, was called the general tariff. Germany had specific commercial conventions with not more than a dozen nations, but under the automatic operation of the favored-nation clause fully fifty coun- tries enjoyed her conventional tariff rates. In illustra- tion of the operation of this clause, the conventional treaty with Prance made a reduction from the German general tariff of twenty per cent, on machine tools in return for an equivalent reduction by France on Ger- man leather goods. England and Italy, having favored- nation treaties with France and Germany, got their leather goods into France and their machine tools into Germany at the conventional rates. If France had re- duced the duty on coal from England, the reduced rate would have applied to German coal. The French system of maximum and minimum sched- ules differed somewhat from the conventional tariff sys- tem. Instead of two rates for a selected list of articles, as in the case of the German tariff, it provided two rates on the majority of articles on which duties were im- posed. In the application of these rates the maximum schedule corresponded to the general tariff, and the minimum schedule to the conventional tariff. The Eu- ropean nations which adopted the maximum and mini- ECONOMIC ALLIANCES 83 mum schedule as the basis of their tariff systems were France, Spain, Portugal, Greece, and Norway. The na- tions which adopted the conventional system were Ger- many, Austria-Hungary, Russia, Italy, Switzerland, Serbia, Eumania, and Bulgaria. In the application of the favored nation clause as a modifying element, the practice of modern commercial intercourse by the European nations was the reversal of that which obtained in the celebrated Methuen Treaty. The contracting countries did not seek to establish trade relations to their mutual advantage by providing for the specific disadvantage of other countries, as was done in that convention. Instead, each sought to secure conces- sions on the products in which it was most interested in obtaining a market, leaving other countries to take care of themselves. In some instances this was a reversion to the commercial treaties among the Italian City States of the thirteenth century, in which the favored-nation principle existed in germ form. But its application was much more complex. The schedules were modified by means of numerous classifications. Germany has been given an undeserved reputation for ability in manipulating these classifications, so that favored-nation rates meant something or nothing, just as she chose to have them mean. The misleading argument of percentages in specific treaties is sometimes resorted to to prove the case, but Germany was not superman in making tariff treaties any more than in erecting a mod- ern state on a biological argument of the right of might and of the survival of the fittest. In her passion for minutiae she frequently overlooked advantages which might have been obtained through a broader spirit. To her tariff -makers a pinhead was as big as a crowbar. 84 AMERICAN FOREIGN TRADE The Russo-German treaty of 1894 has been frequently cited as an evidence of Teutonic super-shrewdness. Rus- sia and Germany had been engaged in a tariff war which had proved mutually disadvantageous. The commercial convention showed the full knowledge of Russia's eco- nomic and industrial possibilities. Germany utilized this knowledge to secure concessions to her own advan- tage and to the disadvantage of competitors for Russian trade. But Russia also prospered in her trade relations with Germany. She was not the helpless victim of eco- nomic exploitation that has been represented. This is not the popular view, but it is borne out by the trade statistics, and the general features of the intercourse be- tween the two countries. To go afield from the intricacies of the European tariffs, a clear illustration of the application of the fa- vored-nation clause is found in the Far East. It is shown in the tariff treaties of Japan made in 1911 with England and Germany. Both those countries demon- strated how the principle could be applied to their re- spective commercial policies. Article VIII of the treaty between Engl-and and Japan provided that the articles, the produce or manufacture of the United Kingdom enumerated in a schedule which was annexed, should not, on importation into Japan, be subjected to higher customs duties than those specified in that schedule. The textile and the iron and steel schedules were the principal ones. The duties specified, particularly on cottons, were considerably lower than the statutory duties. Those on pig-iron and tin-plate also were materially lower. These were commodities in which the United Kingdom had the advantage in the ECONOMIC ALLIANCES 85 Japanese market over competing countries. Some kinds of paints also were included in this category. The citation of some of the items with the treaty and the statutory rates illustrates the working of the favored- nation treatment. In a few instances also the statutory rates and the treaty rates were identical. This was a means of guaranteeing England against an increase in the specified rates by any general tariff legisla- tion. 1 The provisions in the treaty with Germany were simi- lar to those in that with England, but they covered prin- 1 Tariff Schedule 100 kin net weight. (100 kin equal 133 pounds.) (1 yen equals 50 cents.) Treaty Statutory Rates Kates No. Yen Yen 266 Paints, 6 kilos or less 4.25 6.40 275 Linen yarns: Single, gray 8.60 9.25 298 Cotton tissues, etc., weighing not more than 5 kilos, gray, 19 threads or less 15.30 23.00 35 threads or less 28.70 43.00 43 threads or less 38.00 57.00 More than 43 51.30 77.00 Weighing more than 5 kilos: 19 threads or less 6.70 11.00 35 threads or less 8.00 18.00 43 threads or less 10.70 22.00 More than 43 13.30 28.00 301 Woolens: Weighing not more than 200 grammes per square meter 57.50 70.00 Weighing not more than 500 grammes 45.00 60.00 462 Iron : Pig iron 0.83 1.00 Plates and sheets not coated 0.30 0.40 Coated : Tinned 0.70 0.90 Galvanized 1.00 2.00 86 AMERICAN FOREIGN TEADE cipally the products in which Germany was strongest in the Japanese market. The United States, under the favored-nation treat- ment, got the same rates that England and Germany did. But the United States exported to the Japanese market few of the textiles, particularly cotton goods, which Eng- land exported. These were almost a Manchester monop- oly. Moreover, while England could export pig-iron with comparatively slight land-transportation charges, because of the nearness of her blast-furnaces to seaports, the United States would have heavy charges because of the long haul necessary to reach seaboard. Thus, while the Anglo-Japanese Treaty rates were not to the spe- cific disadvantage of the United States, and in that sense did not follow the Methuen practice, they observed the Methuen principle of securing an advantage to one coun- try at the expense of another, or at most with only an in- cidental advantage to it. The application of the favored-nation treatment in future commercial intercourse is surrounded with un- certainties. There are, in the first place, the new na- tions. They will have economic policies of their own, or else they will not be free nations. The world economic tendency is toward nationalism. Internationalism, as a theory of political benevolence, does not alter this tend- ency. Instead, it is emphasized by the policies of the great powers. The industrial instinct of peoples grouped as nations has been one of the verities of history. In its twentieth- century developments it has largely partaken of the na- ture of industrialization, sometimes described as eco- nomic protectionism. In most of its manifestations it has taken the form of protective tariff, often accom- ECONOMIC ALLIANCES 87 panied by bounties or subsidies to stimulate produc- tion. Statesmen responsible for the destinies of growing commonwealths have not bothered about John Stuart Mills's justification of new countries violating the gen- eral principle of free trade and employing artificial means to build up their industries. They have done it simply as national policy. Some of them have not even known the philosopher's later modification of his views, and the preference he expressed for direct bounties in- stead of protective duties. British commonwealths en- joying economic autonomy have employed both methods. Canada stimulated her iron and steel industries by direct bounties and subsidies as well as by protective tariffs. Australia fomented her agricultural production by a premium on the cultivation of rice, tobacco, cotton, and coffee, while at the same time she protected these products in her tariff. Older countries also have shown the force of the indus- trial instinct. Spain, although neglecting the possibili- ties of developing her raw resources of copper and iron ore, established textile industries by means of a high tariff. The thriving city of Barcelona is the justifica- tion of this policy, regardless of its conflict with the formula of the classical school of political economists. Italy, with her natural resources principally agri- cultural, without natural fuel, and with no raw copper, developed textile and electrical industries that gave her a world market. The genius of Sergius de Witte gave Kussia an indus- trial life that was most promising. It centered princi- pally in the textile and chemical industries of Warsaw and Lodz. Poland is one of the new nations, and these 88 AMERICAN FOREIGN TRADE industrial centers are in Poland. The industrial instinct of the new and independent Poland is likely to find fur- ther expression. Industrialization is apt to become a cardinal part of her national policy. Her new national life must be molded to her own circumstances. This means that her commercial intercourse must be based on what is conceived to be best for Poland by her people. Others of the new nations are principally agricultural, and the development of economic protectionism may not be so marked, yet inevitably there will be manifestations of it. All these countries will want to find their place in world commercial intercourse. The point of great interest to them is their status with favored nations and as favored nations. The indications are clear that the great powers will have very distinct national policies of their own. Whether this will take the form of conditional instead of unconditional favored-nation treatment will depend in some degree on the action of two or three commercial nations. The most powerful figure among them is Great Britain, and Great Britain has entered on a new era in trade and industry. Some of its manufactures are purely domestic ; more extend beyond England's borders. It is especially not as England, but as the British Em- pire, that the new tendencies are to be considered. Some colonial statesmen have indicated a preference for the term " commonwealth " instead of " empire." But in trade relations it is in reality an empire that is formu- lating a policy and that must be dealt with by other countries. For that reason the term is retained. The ECONOMIC ALLIANCES 89 British Empire and the United States are to-day and to- morrow the two great world powers in international trade. The British Empire receives consideration first. CHAPTER VII BRITISH TEADE POLICY Edmund Burke's survey of England's trade two centuries ago — Before and after the Great War — Imperial preference as an outcome — From Joseph Chamberlain to Lloyd George — Protective tariff ten- dencies in war measures — The Budget of 1919 — The self-governing colonies — India and the dependencies — The world view — Disguised or straightforward protection ? — Government participation in finance and commerce — British trading corporation — Direct subsidies — Some national traits — British interests the key to British policy. We stand where we have an immense view of what is and what is past. Let us, before we descend from this noble eminence, reflect that this growth of our national prosperity has happened within the short period of the life of man. It has happened within sixty-eight years. There are those alive whose memory might touch the two extremities. For in- stance, My Lord Bathurst might remember all the stages of the progress. He was in 1704 of an age at least able to comprehend such things. THE speaker was Edmund Burke; the place, the House of Commons ; the theme, conciliation with America. The courtly eulogy of Lord Bathurst was the preface to statistics of exports as they appealed to the opulent imagination of the foremost political philosopher of the day. The purpose was to show the importance to England of keeping the commerce of the revolting colonies, which was in reality foreign com- merce. The succinct story of commercial progress, as it flashed through the penetrating mind of Burke, was that 90 BEITISH TRADE POLICY 91 in the opening years of the eighteenth century, when there were five million inhabitants, the whole export trade of England amounted to six and a half million pounds sterling, and that less than seventy-five years later the commerce with the American colonies alone had amounted to this sum. Export commerce of the United Kingdom in 1913, with forty-five million inhabitants, was in excess of five hundred and fifty million pounds sterling or $2,700,000,- 000. The span of three Biblical lives embraces the growth of exports to these stately statistics. The inter- val covers England's evolution as the workshop, the warehouse, and the clearing-house of the world. The figures visualize the impressive drama of British trade as it unfolded in little more than two centuries. The Great War interrupted, but could not destroy, the volume of this trade. Temporary war measures merged into permanent policies and government partici- pation in industry, finance and commerce became ac- cepted as policy in the future trade relations of the United Kingdom. The most important result is im- perial preference, propounded in peace by Joseph Cham- berlain, and accepted in war by Lloyd George. A resume of the British movements to get away from free trade is desirable in order to appreciate the change. So strongly had tradition entrenched itself that when they began their agitation late in the nineties the English protectionists found it essential to seek the thing with- out the name. The approaches toward protection as a national policy were made under various names — fair trade, agricultural aid, fiscal reform, fiscal necessity, and, finally, tariff reform. The most aggressive agita- tion was carried on under the latter name. 92 AMERICAN FOREIGN TRADE An American protectionist, keeping in mind Mr. Blaine's dictum not to assume that protection, is in all countries and in all circumstances the wisest policy, may examine the shifting aspects of the controversy dispas- sionately. The most virile movement, under the name of tariff reform, was instituted by the radical leader, Joseph Chamberlain, after he left the Liberal party and united with the Tories in opposition to Home Rule for Ireland. This coalition was known as the Unionist party. The effort was to have it unite on tariff reform as a political issue in addition to irreconcilable opposi- tion to Home Rule. In the rough, the program as first promulgated was not to tax raw material; to tax foreign manufactures both for revenue and in order to protect British manu- facturers against foreign competition; to enact a tariff with retaliatory provisions as a means of securing fair treatment from countries that had hostile tariffs ; to keep British capital employed in industries at home instead of letting it go abroad to be paid out in wages to foreign workmen; to tax food products, and to strengthen the political ties between the colonies and the mother coun- try by preferential schedules. " Tariff reformers," said Joseph Chamberlain in his London speech in 1904, " have three objects in view. We hope to stimulate the industry and invention of this country by giving it greater security. We believe that it is the duty of our government to defend the commerce of the country against unfair competition, and we desire to encourage trade within the Empire and strengthen and unite it by these means." Joseph Chamberlain was not deeply versed in eco- nomics. His program, as set forth in his speeches, was BRITISH TRADE POLICY 93 crude, and he frequently contradicted himself; yet he held tenaciously to the imperial idea politically, and to imperial tariff preference as a part of it. With his usual boldness, he faced the main issue squarely when he pro- nounced in favor of taxing food products, but he dis- played a childlike ingenuousness when he assumed that the great colonies, such as Canada and Australia, would halt their own industries by refraining from protective duties as against the manufactures of the United King- dom. 1 The friendly promptness with which Canada and Australia corrected this error caused the subsequent discussion of colonial preference to be conducted with the full knowledge that the preferential rate for British manufactures was to be only for such articles as would not compete seriously with the products of colonial in- dustry. The purpose of the colonies was in reality to secure a seat at the council table. Challenged in their citadel, the free-traders reaffirmed their doctrine, though within limited range. Free trade was no longer the universal principle, the economic ver- ity for all the world, but the most profitable and, there- fore, the most convenient fiscal policy for Great Britain. "We are defending it [free trade]," said Premier As- quith in his London speech in 1909, " on the platform and in the House of Commons on the ground that experi- ence has shown that it is the system best suited, nay, that it is the only system suited at all, to the actual con- i Mr. Chamberlain, in a speech at Glasgow in October, 1903, proposed these duties on foreign products: Wheat and flour, two shillings per quarter of eight bushels; meat and dairy produce, five per cent, ad va- lorem. Maize and bacon were excluded from duties. Remissions were to be made of three fourths of the duty on tea, one half that on sugar, and one half that on coffee and cocoa. Colonial preference was to be established by exemption from the duties imposed. Preferential treat- ment also was to be given colonial wines and fruits. 94 AMERICAN FOREIGN TRADE dition of industrial exigencies and practical everyday necessities of British trade." The free-traders affirmed that protection and preference meant dearer food and dearer raw material and, as a consequence, increased restriction of production and commerce, which meant an increase of the number of unemployed. The contest raged fiercely. There were occasional broadsides against the United States, but the campaign was directed with special virulence against Germany. The rallying cry was to destroy German competition in the British market, and it was then that the probability of the war of arms as well as a war of trade began to dawn on the people of the United Kingdom. The movement for a time seemed to be making head- way. Many of the crudities of the Chamberlain plan were pruned away, and definite legislation on a pro- tective basis was outlined. But after ten years agita- tion it collapsed. One reason was the inability to array all the Unionist elements in support of the scheme. Many of the Conservatives would not subordinate their traditional free-trade principles to their hatred of Home Rule, and thus make tariff reform the principal program of the Unionists. Arthur J. Balfour, the dialectical leader of the Unionists, who failed to accept the tariff policy in its entirety, was pushed aside, and Bonar Law, a robust partizan, supplanted him; but this did not change the situation. The principal cause of the failure of the movement was the unwillingness of the people of the United Kingdom to pay a tax on food products, and there appeared to be no possibility of laying tariff duties and carrying out schemes of colonial preference without taxing wheat and other food imports. The growing Labor party was BRITISH TRADE POLICY 95 implacably hostile to such a proposition, and the middle classes, outside the manufacturers, were lukewarm. The majestic body of British public opinion voiced the conclusion that a continuance of the free-trade system was more convenient and more profitable than would be the change to a protective tariff. In the midsummer of 1914 it might fairly be said that protection in England was a dead issue. The Unionists for ten years had tried to get into power on it, and had failed. The trade with Germany in 1913 amounted approximately to $400,000,- 000 imports and to $203,000,000 exports. 1 The British people as a whole seemed satisfied with this condition. More disquieting to the protectionists was the limited production of pig-iron. In the period between 1894 and 1908 the average annual production was eight million two hundred and thirty -nine thousand tons in the United Kingdom, and six million one hundred and eighty-one thousand tons in Germany. In 1913 Germany had trebled this average production. The output of her blast-furnaces was nineteen million two hundred and ninety-two thousand tons; that of the United Kingdom was only ten million four hundred and seventy-nine thou- sand tons. The British manufacturers themselves were blamed for the slight increase in British production, but their retort was that their capital was more beneficially employed in other forms of industrial production. The Great War startled England, but it did not cause an immediate change in public sentiment concerning the relative merits of free trade and protection as the policy most convenient and most profitable for the United Kingdom. It did, however, lead gradually to the in- i British Board of Trade Statistics for 1913, — Imports from Ger- many into the United Kingdom, £80,411,000; exports, £40,678,000. 96 AMERICAN FOREIGN TRADE dorsement of the policy of imperial preference. The steps were ^progressive. Parliament directed consulta- tion with the governments of the dominions in order to insure the economic mobilization of the Empire. A royal commission, known as the Balfour Commission, because its chairman was Lord Balfour of Burleigh, was appointed. It reported in favor of discriminating duties to encourage industry and trade within the Empire. This commission agreed on the general proposition of preferential duties. Some of its members qualified this with the statement that they were not abandoning their free-trade principles, but were recognizing an ac- tual condition. Following this report the Imperial War Conference, in which the colonial premiers participated, resolved in 1917 that the time had arrived when all possible encouragement should be given to the develop- ment of imperial resources, and especially to making the empire independent of other countries in respect to food supplies, raw materials, and essential industries. With these objects in view the conference expressed itself in favor of the principle that each part of the empire, hav- ing due regard to the interests of the Allies, should give especially favorable treatment and facilities to the pro- duce and manufactures of other parts of the empire. This recognition of the principle of imperial prefer- ence was followed by more definite commitments to its practice on the part of the Government. Not all parties or political groups accepted it, but it manifestly was acceptable to a large body of public opinion. The reser- vations made did not weaken this acceptance. The popular idea was that under imperial preference Great Britain would be an economic unit both as to raw ma- terials and manufactured products. ECONOMIC ALLIANCES 81 reason, have characterized it as the bulwark of protec- tion in accordance with nationalistic pblicies. It has been described as a device for lowering high tariffs, and, under the European practice, that undoubtedly has been the effect ; but there also has been the preliminary prac- tice of enacting high protective duties as the basis for concessions. The results of the general practice, how- ever, are more important than the claims of the contro- versalists. Under the unconditional interpretation of the favored-nation treatment, with frequent modifica- tions, the European nations in the course of half a cen- tury secured uniformity in commercial intercourse by developing a system of conventional tariffs. All the leading commercial nations with the exception of Great Britain, which was adhering to a purely revenue tariff, at the outbreak of the Great War had adopted the double tariff system on the basis of maximum and mini- mum schedules. Germany and France were the expo- nents of the different applications given to the sys- tem through these two sets of schedules. German policy assumed the expansion of exports as the primary and principal national necessity. It assumed com- parative safety from foreign competition. The French system, on the contrary, assumed primarily the neces- sity of defending and fomenting the national production, both agricultural and industrial, from foreign compe- tition. It looked only secondarily to the expansion of exports. In practice the French system was readjusted as a working measure through administrative methods. Germany's system had less flexibility, but under her policy fixity was more important than flexibility. Germany's conventional tariff system originated after the adoption of the Zollverein, or Customs Union, of the 82 AMERICAN FOREIGN TRADE several states in 1870. The Imperial German Govern- ment in 1879 concluded reciprocity treaties with seven European countries. The negotiations were conducted on the basis of the existing tariff, the schedules of which were reduced to the countries that entered into the treaties and automatically to those which were entitled to favored-nation treatment. The reduced tariff, being based on commercial conventions, was known as the con- ventional tariff, while the old tariff, which was not abro- gated, was called the general tariff. Germany had specific commercial conventions with not more than a dozen nations, but under the automatic operation of the favored-nation clause fully fifty coun- tries enjoyed her conventional tariff rates. In illustra- tion of the operation of this clause, the conventional treaty with France made a reduction from the German general tariff of twenty per cent, on machine tools in return for an equivalent reduction by France on Ger- man leather goods. England and Italy, having favored- nation treaties with France and Germany, got their leather goods into France and their machine tools into Germany at the conventional rates. If France had re- duced the duty on coal from England, the reduced rate would have applied to German coal. The French system of maximum and minimum sched- ules differed somewhat from the conventional tariff sys- tem. Instead of two rates for a selected list of articles, as in the case of the German tariff, it provided two rates on the majority of articles on which duties were im- posed. In the application of these rates the maximum schedule corresponded to the general tariff, and the minimum schedule to the conventional tariff. The Eu- ropean nations which adopted the maximum and mini- ECONOMIC ALLIANCES 83 mum schedule as the basis of their tariff systems were France, Spain, Portugal, Greece, and Norway. The na- tions which adopted the conventional system were Ger- many, Austria-Hungary, Russia, Italy, Switzerland, Serbia, Eumania, and Bulgaria. In the application of the favored nation clause as a modifying element, the practice of modern commercial intercourse by the European nations was the reversal of that which obtained in the celebrated Methuen Treaty. The contracting countries did not seek to establish trade relations to their mutual advantage by providing for the specific disadvantage of other countries, as was done in that convention. Instead, each sought to secure conces- sions on the products in which it was most interested in obtaining a market, leaving other countries to take care of themselves. In some instances this was a reversion to the commercial treaties among the Italian City States of the thirteenth century, in which the favored-nation principle existed in germ form. But its application was much more complex. The schedules were modified by means of numerous classifications. Germany has been given an undeserved reputation for ability in manipulating these classifications, so that favored-nation rates meant something or nothing, just as she chose to have them mean. The misleading argument of percentages in specific treaties is sometimes resorted to to prove the case, but Germany was not superman in making tariff treaties any more than in erecting a mod- ern state on a biological argument of the right of might and of the survival of the fittest. In her passion for minutiae she frequently overlooked advantages which might have been obtained through a broader spirit. To her tariff -makers a pinhead was as big as a crowbar. 84 AMERICAN FOREIGN TRADE The Russo-German treaty of 1894 has been frequently cited as an evidence of Teutonic super-shrewdness. Rus- sia and Germany had been engaged in a tariff war which had proved mutually disadvantageous. The commercial convention showed the full knowledge of Russia's eco- nomic and industrial possibilities. Germany utilized this knowledge to secure concessions to her own advan- tage and to the disadvantage of competitors for Russian trade. But Russia also prospered in her trade relations with Germany. She was not the helpless victim of eco- nomic exploitation that has been represented. This is not the popular view, but it is borne out by the trade statistics, and the general features of the intercourse be- tween the two countries. To go afield from the intricacies of the European tariffs, a clear illustration of the application of the fa- vored-nation clause is found in the Far East. It is shown in the tariff treaties of Japan made in 1911 with England and Germany. Both those countries demon- strated how the principle could be applied to their re- spective commercial policies. Article VIII of the treaty between Engl-and and Japan provided that the articles, the produce or manufacture of the United Kingdom enumerated in a schedule which was annexed, should not, on importation into Japan, be subjected to higher customs duties than those specified in that schedule. The textile and the iron and steel schedules were the principal ones. The duties specified, particularly on cottons, were considerably lower than the statutory duties. Those on pig-iron and tin-plate also were materially lower. These were commodities in which the United Kingdom had the advantage in the ECONOMIC ALLIANCES 85 Japanese market over competing countries. Some kinds of paints also were included in this category. The citation of some of the items with the treaty and the statutory rates illustrates the working of the favored- nation treatment. In a few instances also the statutory rates and the treaty rates were identical. This was a means of guaranteeing England against an increase in the specified rates by any general tariff legisla- tion. 1 The provisions in the treaty with Germany were simi- lar to those in that with England, but they covered prin- 1 Tariff Schedule 100 kin net weight. (100 kin equal 133 pounds.) ( 1 yen equals 50 cents. ) Treaty Statutory Rates Rates No. Yen Yen 266 Paints, 6 kilos or less 4.25 6.40 275 Linen yarns: Single, gray 8.60 9.25 298 Cotton tissues, etc., weighing not more than 5 kilos, gray, 19 threads or less 15.30 23.00 35 threads or less 28.70 43.00 43 threads or less 38.00 57.00 More than 43 51.30 77.00 Weighing more than 5 kilos: 19 threads or less 6.70 11.00 35 threads or less 8.00 18.00 43 threads or less 10.70 22.00 More than 43 13.30 28.00 301 Woolens: Weighing not more than 200 grammes per square meter 57.50 70.00 Weighing not more than 500 grammes 45.00 60.00 462 Iron : Pig iron 0.83 1.00 Plates and sheets not coated 0.30 0.40 Coated : Tinned 0.70 0.90 Galvanized 1.00 2.00 86 AMERICAN FOREIGN TRADE cipally the products in which Germany was strongest in the Japanese market. The United States, under the favored-nation treat- ment, got the same rates that England and Germany did. But the United States exported to the Japanese market few of the textiles, particularly cotton goods, which Eng- land exported. These were almost a Manchester monop- oly. Moreover, while England could export pig-iron with comparatively slight land-transportation charges, because of the nearness of her blast-furnaces to seaports, the United States would have heavy charges because of the long haul necessary to reach seaboard. Thus, while the Anglo-Japanese Treaty rates were not to the spe- cific disadvantage of the United States, and in that sense did not follow the Methuen practice, they observed the Methuen principle of securing an advantage to one coun- try at the expense of another, or at most with only an in- cidental advantage to it. The application of the favored-nation treatment in future commercial intercourse is surrounded with un- certainties. There are, in the first place, the new na- tions. They will have economic policies of their own, or else they will not be free nations. The world economic tendency is toward nationalism. Internationalism, as a theory of political benevolence, does not alter this tend- ency. Instead, it is emphasized by the policies of the great powers. The industrial instinct of peoples grouped as nations has been one of the verities of history. In its twentieth- century developments it has largely partaken of the na- ture of industrialization, sometimes described as eco- nomic protectionism. In most of its manifestations it has taken the form of protective tariff, often accom- ECONOMIC ALLIANCES 87 panied by bounties or subsidies to stimulate produc- tion. Statesmen responsible for the destinies of growing commonwealths have not bothered about John Stuart Mills's justification of new countries violating the gen- eral principle of free trade and employing artificial means to build up their industries. They have done it simply as national policy. Some of them have not even known the philosopher's later modification of his views, and the preference he expressed for direct bounties in- stead of protective duties. British commonwealths en- joying economic autonomy have employed both methods. Canada stimulated her iron and steel industries by direct bounties and subsidies as well as by protective tariffs. Australia fomented her agricultural production by a premium on the cultivation of rice, tobacco, cotton, and coffee, while at the same time she protected these products in her tariff. Older countries also have shown the force of the indus- trial instinct. Spain, although neglecting the possibili- ties of developing her raw resources of copper and iron ore, established textile industries by means of a high tariff. The thriving city of Barcelona is the justifica- tion of this policy, regardless of its conflict with the formula of the classical school of political economists. Italy, with her natural resources principally agri- cultural, without natural fuel, and with no raw copper, developed textile and electrical industries that gave her a world market. The genius of Sergius de Witte gave Russia an indus- trial life that was most promising. It centered princi- pally in the textile and chemical industries of Warsaw and Lodz. Poland is one of the new nations, and these 88 AMERICAN FOREIGN TRADE industrial centers are in Poland. The industrial instinct of the new and independent Poland is likely to find fur- ther expression. Industrialization is apt to become a cardinal part of her national policy. Her new national life must be molded to her own circumstances. This means that her commercial intercourse must be based on what is conceived to be best for Poland by her people. Others of the new nations are principally agricultural, and the development of economic protectionism may not be so marked, yet inevitably there will be manifestations of it. All these countries will want to find their place in world commercial intercourse. The point of great interest to them is their status with favored nations and as favored nations. The indications are clear that the great powers will have very distinct national policies of their own. Whether this will take the form of conditional instead of unconditional favored-nation treatment will depend in some degree on the action of two or three commercial nations. The most powerful figure among them is Great Britain, and Great Britain has entered on a new era in trade and industry. Some of its manufactures are purely domestic ; more extend beyond England's borders. It is especially not as England, but as the British Em- pire, that the new tendencies are to be considered. Some colonial statesmen have indicated a preference for the term " commonwealth " instead of " empire." But in trade relations it is in reality an empire that is formu- lating a policy and that must be dealt with by other countries. For that reason the term is retained. The ECONOMIC ALLIANCES 89 British Empire and the United States are to-day and to- morrow the two great world powers in international trade. The British Empire receives consideration first. CHAPTER VII BRITISH TRADE POLICY Edmund Burke's survey of England's trade two centuries ago — Before and after the Great War — Imperial preference as an outcome — From Joseph Chamberlain to Lloyd George — Protective tariff ten- dencies in war measures — The Budget of 1919 — The self-governing colonies — India and the dependencies — The world view — Disguised or straightforward protection ? — Government participation in finance and commerce — British trading corporation — Direct subsidies — Some national traits — British interests the key to British policy. We stand where we have an immense view of what is and what is past. Let us, before we descend from this noble eminence, reflect that this growth of our national prosperity has happened within the short period of the life of man. It has happened within sixty-eight years. There are those alive whose memory might touch the two extremities. For in- stance, My Lord Bathurst might remember all the stages of the progress. He was in 1704 of an age at least able to comprehend such things. THE speaker was Edmund Burke; the place, the House of Commons ; the theme, conciliation with America. The courtly eulogy of Lord Bathurst was the preface to statistics of exports as they appealed to the opulent imagination of the foremost political philosopher of the day. The purpose was to show the importance to England of keeping the commerce of the revolting colonies, which was in reality foreign com- merce. The succinct story of commercial progress, as it flashed through the penetrating mind of Burke, was that BRITISH TRADE POLICY 91 in the opening years of the eighteenth century, when there were five million inhabitants, the whole export trade of England amounted to six and a half million pounds sterling, and that less than seventy-five years later the commerce with the American colonies alone had amounted to this sum. Export commerce of the United Kingdom in 1913, with forty-five million inhabitants, was in excess of five hundred and fifty million pounds sterling or f 2,700,000,- 000. The span of three Biblical lives embraces the growth of exports to these stately statistics. The inter- val covers England's evolution as the workshop, the warehouse, and the clearing-house of the world. The figures visualize the impressive drama of British trade as it unfolded in little more than two centuries. The Great War interrupted, but could not destroy, the volume of this trade. Temporary war measures merged into permanent policies and government partici- pation in industry, finance and commerce became ac- cepted as policy in the future trade relations of the United Kingdom. The most important result is im- perial preference, propounded in peace by Joseph Cham- berlain, and accepted in war by Lloyd George. A resume of the British movements to get away from free trade is desirable in order to appreciate the change. So strongly had tradition entrenched itself that when they began their agitation late in the nineties the English protectionists found it essential to seek the thing with- out the name. The approaches toward protection as a national policy were made under various names — fair trade, agricultural aid, fiscal reform, fiscal necessity, and, finally, tariff reform. The most aggressive agita- tion was carried on under the latter name. 92 AMERICAN FOREIGN TRADE An American protectionist, keeping in mind Mr. Blaine's dictum not to assume that protection, is in all countries and in all circumstances the wisest policy, may examine the shifting aspects of the controversy dispas- sionately. The most virile movement, under the name of tariff reform, was instituted by the radical leader, Joseph Chamberlain, after he left the Liberal party and united with the Tories in opposition to Home Rule for Ireland. This coalition was known as the Unionist party. The effort was to have it unite on tariff reform as a political issue in addition to irreconcilable opposi- tion to Home Rule. In the rough, the program as first promulgated was not to tax raw material; to tax foreign manufactures both for revenue and in order to protect British manu- facturers against foreign competition; to enact a tariff with retaliatory provisions as a means of securing fair treatment from countries that had hostile tariffs ; to keep British capital employed in industries at home instead of letting it go abroad to be paid out in wages to foreign workmen; to tax food products, and to strengthen the political ties between the colonies and the mother coun- try by preferential schedules. " Tariff reformers," said Joseph Chamberlain in his London speech in 1904, " have three objects in view. We hope to stimulate the industry and invention of this country by giving it greater security. We believe that it is the duty of our government to defend the commerce of the country against unfair competition, and we desire to encourage trade within the Empire and strengthen and unite it by these means." Joseph Chamberlain was not deeply versed in eco- nomics. His program, as set forth in his speeches, was BRITISH TRADE POLICY 93 crude, and lie frequently contradicted himself; yet he held tenaciously to the imperial idea politically, and to imperial tariff preference as a part of it. With his usual boldness, he faced the main issue squarely when he pro- nounced in favor of taxing food products, but he dis- played a childlike ingenuousness when he assumed that the great colonies, such as Canada and Australia, would halt their own industries by refraining from protective duties as against the manufactures of the United King- dom. 1 The friendly promptness with which Canada and Australia corrected this error caused the subsequent discussion of colonial preference to be conducted with the full knowledge that the preferential rate for British manufactures was to be only for such articles as would not compete seriously with the products of colonial in- dustry. The purpose of the colonies was in reality to secure a seat at the council table. Challenged in their citadel, the free-traders reaffirmed their doctrine, though within limited range. Free trade was no longer the universal principle, the economic ver- ity for all the world, but the most profitable and, there- fore, the most convenient fiscal policy for Great Britain. "We are defending it [free trade]," said Premier As- quith in his London speech in 1909, " on the platform and in the House of Commons on the ground that experi- ence has shown that it is the system best suited, nay, that it is the only system suited at all, to the actual con- i Mr. Chamberlain, in a speech at Glasgow in October, 1903, proposed these duties on foreign products: Wheat and flour, two shillings per quarter of eight bushels; meat and dairy produce, five per cent, ad va- lorem. Maize and bacon were excluded from duties. Remissions were to be made of three fourths of the duty on tea, one half that on sugar, and one half that on coffee and cocoa. Colonial preference was to be established by exemption from the duties imposed. Preferential treat- ment also was to be given colonial wines and fruits. 94 AMERICAN FOREIGN TRADE dition of industrial exigencies and practical everyda necessities of British trade." The free-traders affirme that protection and preference meant dearer food an dearer raw material and, as a consequence, increase restriction of production and commerce, which mear an increase of the number of unemployed. The contest raged fiercely. There were occasions broadsides against the United States, but the campaig was directed with special virulence against German] The rallying cry was to destroy German competition i the British market, and it was then that the probabilit of the war of arms as well as a war of trade began t dawn on the people of the United Kingdom. The movement for a time seemed to be making head way. Many of the crudities of the Chamberlain plai were pruned away, and definite legislation on a pre tective basis was outlined. But after ten years agits tion it collapsed. One reason was the inability to arra; all the Unionist elements in support of the scheme Many of the Conservatives would not subordinate thei traditional free-trade principles to their hatred of Horn Rule, and thus make tariff reform the principal prograr of the Unionists. Arthur J. Balfour, the dialectics leader of the Unionists, who failed to accept the tarii policy in its entirety, was pushed aside, and Bonar Law a robust partizan, supplanted him; but this did no change the situation. The principal cause of the failure of the movement wa the unwillingness of the people of the United Kingdoi to pay a tax on food products, and there appeared t be no possibility of laying tariff duties and carrying on schemes of colonial preference without taxing whea and other food imports. The growing Labor party wa BRITISH TRADE POLICY 95 implacably hostile to such a proposition, and the middle classes, outside the manufacturers, were lukewarm. The majestic body of British public opinion voiced the conclusion that a continuance of the free-trade system was more convenient and more profitable than would be the change to a protective tariff. In the midsummer of 1914 it might fairly be said that protection in England was a dead issue. The Unionists for ten years had tried to get into power on it, and had failed. The trade with Germany in 1913 amounted approximately to $400,000,- 000 imports and to $203,000,000 exports. 1 The British people as a whole seemed satisfied with this condition. More disquieting to the protectionists was the limited production of pig-iron. In the period between 1894 and 1908 the average annual production was eight million two hundred and thirty-nine thousand tons in the United Kingdom, and six million one hundred and eighty-one thousand tons in Germany. In 1913 Germany had trebled this average production. The output of her blast-furnaces was nineteen million two hundred and ninety-two thousand tons; that of the United Kingdom was only ten million four hundred and seventy-nine thou- sand tons. The British manufacturers themselves were blamed for the slight increase in British production, but their retort was that their capital was more beneficially employed in other forms of industrial production. The Great War startled England, but it did not cause an immediate change in public sentiment concerning the relative merits of free trade and protection as the policy most convenient and most profitable for the United Kingdom. It did, however, lead gradually to the in- i British Board of Trade Statistics for 1913,— Imports from Ger- many into the United Kingdom, £80,411,000; exports, £40,678,000. 96 AMERICAN FOREIGN TRADE dorsement of the policy of imperial preference. The steps were progressive. Parliament directed consulta- tion with the governments of the dominions in order to insure the economic mobilization of the Empire. A royal commission, known as the Balfour Commission, because its chairman was Lord Balfour of Burleigh, was appointed. It reported in favor of discriminating duties to encourage industry and trade within the Empire. This commission agreed on the general proposition of preferential duties. Some of its members qualified this with the statement that they were not abandoning their free-trade principles, but were recognizing an ac- tual condition. Following this report the Imperial War Conference, in which the colonial premiers participated, resolved in 1917 that the time had arrived when all possible encouragement should be given to the develop- ment of imperial resources, and especially to making the empire independent of other countries in respect to food supplies, raw materials, and essential industries. With these objects in view the conference expressed itself in favor of the principle that each part of the empire, hav- ing due regard to the interests of the Allies, should give especially favorable treatment and facilities to the pro- duce and manufactures of other parts of the empire. This recognition of the principle of imperial prefer- ence was followed by more definite commitments to its practice on the part of the Government. Not all parties or political groups accepted it, but it manifestly was acceptable to a large body of public opinion. The reser- vations made did not weaken this acceptance. The popular idea was that under imperial preference Great Britain would be an economic unit both as to raw ma- terials and manufactured products. BRITISH TRADE POLICY 97 The vision of the British Empire as an economic unit kindles the imagination. It means the raw resources of Australia, of New Zealand, of South Africa, of India, of Jamaica, of Canada, and of the countless British pos- sessions which dot the seas pouring in endless stream into the mills and factories of the United Kingdom, and the manufactured articles pouring out for the consump- tion of hundreds of millions of people within and with- out the British domain. But this has been the process without any tariff links to unite the scattered units of the empire. In operation, what the system means is a wider extension and closer interweaving of the colonial system of preferential tariffs with the English tariff and fiscal system. This requires that some complex prob- lems of adjustment with other countries of the world shall be solved. Solution of these problems in some degree will determine whether the plan is more beneficial to the United Kingdom than free trade has been. The solving of them will interest other nations fully as much as Great Britain and will influence their policies. The tariff tendencies were shown in the succession of war-revenue budgets. They increased the duties on the few articles such as tea, tobacco, and coffee on which a tariff for revenue was levied. They also, for the first time, placed duties on manufactured articles, a small list at first, but one which could be increased. The intention undoubtedly was to decrease the excess of imports, and to establish something like a balance of trade ; but the ef- fect was a large measure of incidental protection to Brit- ish manufactures. This effect was further shown in the last war budget, for such it was, although it was adopted in the spring of 1919. By this time the program of imperial preference was being worked out. Prefer- 98 AMERICAN FOREIGN TRADE ence was extended to manufactured articles that are not manufactured for export by the colonies. The effect, of course, was to give the British manufactures protective duties on these articles. A much larger degree of protection, however, was ex- tended under the system of government licenses. For the import of articles from the United States the list was very large. The purpose was the sound fiscal one of decreasing imports because the country could not send the gold abroad to pay for them, and could not afford, economically speaking, to establish further credits; but there was the definite indication that the system was used to lay the foundation for discriminating in trade relations and for giving the British manufactures a permanent advantage growing out of a temporary con- dition. In reference to the colonies the discrimination was open. Print paper and scores of articles from the United States, for example, were refused license, while it was extended to Canadian print paper and the other products. In the budget of 1919 the permanent plan for dis- crimination in tariff was foreshadowed. Austin Cham- berlain, the chancellor of the exchequer, in announcing the budget said that there were four main considerations. The preference should be substantial in amount. The rates Should, as far as possible, be few and simple. Where there was an existing excise duty corresponding to customs duty, the excise must be proportionately ade- quate, so there should be no preference at the expense of the home producer. So far as practicable increasing duties on the products of the Allies for the purpose of imperial preference was to be avoided. This policy in practice worked out by keeping the existing duties on BRITISH TRADE POLICY 99 their products unchanged, and reducing the duties on similar products when coming from British colonies and possessions. Unfriendly critics pointed out that Canada, Australia, and South Africa could derive little benefit from prefer- ential duties on clocks, watches, cinema films, motor- cars, or musical instruments, since they did not manu- facture these articles for export. If they did, this would bring them into stronger competition with the British manufacturers of similar commodities. The real pur- pose of these duties was declared to be to protect the home manufacturers, and the question was how far the list would be extended from time to time. The prefer- ential rates also applied to colonial wines, sugars, tea, cocoa, and coffee. Some general considerations may be briefly suggested. One of these is how far the preferential policies shall be applied to the dependencies as well as to the self-govern- ing colonies which in all their tariff preferences fully protect their own manufactures as against the manufac- tures of England. The preference is simply to goods from the United Kingdom over goods from other coun- tries. India is likely to be a test-point. For many years the Indian Government sought to establish protective duties on certain classes of cotton goods. Whether the Liberals or the Conservatives were in power, the Home Government always defeated these attempts. The most that was allowed was the duty on imported cotton goods of three and a half per cent, with a countervailing excise of the same amount. The stern economic moralists of the Manchester School insisted that India did not know what was good for itself in seeking to establish pro- 100 AMERICAN FOREIGN TRADE tective duties. But they knew what was good for Man- chester. This discrimination was not swept away, al- though, during the war India advanced a substantial loan to the Home Government, and the increase of the duties on cotton goods was acquiesced in, notwithstand- ing there were strong protests against it. The future adjustment of this question will in some measure be a test of preference within the empire. The world at large is not deeply concerned with these questions of adjustment within the empire except as they affect nations outside the empire. Lloyd George de- clared that imperial preference was to be made effective without increasing the cost of food. This would mean that there would be no effort to give the wheat of Canada and Australia a preference over the wheat of the United States and the Argentine Republic. It would avoid the possibilities of complications with those two countries. But it would disappoint the grain-raising colonies. Control of raw materials through colonial export duties is one of the reserve factors of imperial prefer- ence. It has been employed effectively in the past. It is one of the points in the program of the economic sub- jection of Germany by denying raw materials. But it may be employed against friendly nations without un- friendly political intent, and with the open purpose of promoting British industries. The prevention of an American smelting industry for tin has been noted. By laying an export duty on tin for countries outside the United Kingdom it was possible to defer the realiza- tion of this enterprise until tin could be secured from another quarter of the world. During the war recourse was had to the potency of export duties in several instances. The Malay states, BEITISH TKADE POLICY 101 which are not self-governing, again afforded the example. An export duty on tin-ore was adopted, effective from January 1, 1917, by which ore exported under guaranties that it should be smelted in the Straits Settlement, Aus- tralia, or the United Kingdom bore a duty of seventy- two per cent, of the duty on tin ; while ore exported for smelting elsewhere bore the same duty, plus an addi- tional thirty dollars per picul. Previously the export duty had been seventy per cent., with the same discrimi- nation. The action taken, therefore, might be inter- preted as a permanent policy. Palm-oil, which is as necessary for making tin-plate as it is useful in making soaps, was also made the subject of export duties from British West African possessions. No positive judgment can be pronounced on imperial preference in its initial stages. Manifestly, however, the British statesmen who seek to put it into effect desire to keep the question of tariff duties in the background. Disguised or indirect protection is more to their liking. When the tariff reform movement was at its height, the Liberal government offered various measures as an off- set. These included modifications of the Trademark Acts. The Patents Act was Lloyd George's specific in 1906 for giving employment to British labor and off- setting the argument of the protectionists that free trade was responsible for unemployment. Under the Patents Act foreigners who took out patents were compelled to do a certain amount of manufacturing in the United Kingdom. This resulted in the setting up of many American branch establishments in England. During and following the war the tendency has been very marked to formulate a policy of nationalistic fiscal- ism by the regulation of export railroad rates, by the 102 AMERICAN FOREIGN TRADE licensing of investment of capital in constructive enter- prises so as to exclude foreign participation, and by controlling exchange. The colonies come within the beneficial scope of these plans. Some of the advocates of these measures, while characterizing them as a chap- ter in the program of imperial preference, are also bold enough to describe them as the new protection, or as eco- nomic protection, notwithstanding the German origin of the latter term. It is another phase of the tendency to keep tariff schedules in the background, and thus avoid antagonizing free-trade traditions. The world view is not likely to be so circumspect. It recognizes that imperial preference means trade im- perialism on the part of the British Empire. Commer- cial nations realize that they must take measures to adjust themselves to the new British policy. Some of these may require that they suffer inconvenience. Others are likely to be definite measures to prevent dis- criminations, and to insure equality of treatment for their products in British markets whether colonial or in the United Kingdom. They would prefer, however, that British statesmen meet the situation squarely, and ac- knowledge that straightforward protection is a part of the future policy of the empire and is not confined to tariffs. The direct participation of the British Government in commercial and industrial enterprises in its first manifestation had no relation to world trade. It was a war measure, but its effects were not temporary. The chemical and dye industries received direct government financial aid. The purpose was to establish the key industry, essential to munitions-making. A broader ob- ject was to make England forever free from the control BRITISH TRADE POLICY 103 which Germany previously had held of chemicals and dyes. The British chemical and dye industry may, by a process of transition, become a purely private enterprise ; but as such it will continue to have the fostering care of the Government either by protective duties or by other forms of protection. The general policy of the British Government at the outset of the war was to preserve the export trade. The revenue and fiscal and other measures, including the broad powers exercised under the Defense of the Realm Act, were all bent to this purpose. Exports were too valuable an asset to the British Empire to be en- dangered. The most careful solicitude was shown. Many patriotic Britons abroad who were anxious to come home to fight were made to understand, reluctantly on their part, that they could be of more service in con- tinuing as traders. The solicitude to preserve British industries abroad extended to every detail. Nitrate plants in Chile, a neutral country, which suffered few of the war hardships in the way of restricted food and other supplies, found themselves stocked with whole wheat flour at a time when the English people at home, and the people in the United States who were supplying the wheat, had to be content with war bread. In the later and most desperate stage this policy was relaxed somewhat, so as to concentrate every economic resource on winning the war. But the trade prospects after the war were never lost sight of. The Ministry of Recon- struction with its multiplicity of commissions, per- formed a vast service to Great Britain in its adaptation of the needs of the future. Measures for nationalizing the organization of com- merce and industry adopted during the war have a per- 104 AMEEICAN FOEEIGN TEADE manent influence on British trade policy. The principle adopted in some cases was that of subsidizing companies to promote British interests abroad. The immediate purpose was to offset Germany in the war, but it was not intended that the policy entered upon should be concluded with the ending of the war. The British Trading Corporation was the most striking instance of this policy. Originally it was called the British Trade Bank, and was intended to supplement the already ample facilities of London finance for handling international transactions and promoting British commerce abroad. The formation of this financial institution was recom- mended and instituted by the Board of Trade, which is a department of the British Government corresponding to the Department of Commerce in the United States. The substance of the original proposition was that a trade bank with a capital of ten million pounds sterling, part of which should be contributed by the Government, should be formed for the specific purpose of financing enterprises engaged in foreign trade or in providing facilities for commerce. The Board of Trade plan was set forth in detail, and was subsequently broadened. There was some adverse comment in Parliament, and the fear of competition hurtful to existing institutions was also voiced ; but the promise that the corporation should be conducted on lines to aid British trade and industry in foreign fields was sufficient to overcome the objections. The British Trading Corporation is to-day the living evi- dence of England's determination to employ the Govern- ment as a means of extending England's foreign trade. Another example of the new policy was that of the British-Italian Corporation. This was formed by the London banks with a subscribed capital of one million BRITISH TRADE POLICY 105 pounds sterling, but the Government covenanted to con- tribute fifty thousand pounds sterling annually to the company by way of subsidy during each of the first ten years after its incorporation. A company also was formed in Italy, known as the Italian-British corpora- tion, with a capital of four hundred thousand pounds sterling, one half of which was taken by the British cor- poration, and one half by the Italian corporation. The corporations were provided with interlocking director- ates. There was a war purpose in the aid which the British Government gave this enterprise, since it was the desire to undermine the financial and industrial foothold that Germany had gained in Italy. But the government participation was not withdrawn after the armistice was signed. The Anglo-Italian corporation is in all essentials an after-the-war enterprise in which the British Government participates with a view to aiding British industry abroad. The similarity of these two institutions to German institutions will be noted by the observer. They are the frank confession that England, in her foreign trade policy, has accepted the German system. Many other instances may be found in the various measures of gov- ernment participation and control of finance, industry, and commerce. 1 Trade intelligence has not been in the past one of the strong points in British foreign commerce. The British Consular Reports were cast in a mold many years ago, and the mold was broken. These reports formed a body of solid trade literature. One always knew what to i These subjects are covered in their full detail in the extensive series of White Papers issued by the British Government. The files of the Board of Trade Journal may be consulted for a contemporary account of the numerous measures adopted. 106 AMERICAN FOREIGN TRADE find and where to find it. In whatever part of the world reports were made, the general trend was the same with trade statistics of the latest period replacing the statis- tics of a previous period. Useful as the information was, it did not meet changing conditions. Before the war the British consuls were frequently criticized for their lack of enterprise. Unfavorable comparisons were made with the work of American consuls. Some changes had been attempted by the Foreign Intelligence Bureau, but the unscalable wall of tradition was run against. The changes made in the system following the war quickened appreciation of what is news in regard to world trade on the part of the British consular repre- sentatives. Temperament in trade — that is, in international commerce — performs a valuable function, just as it does in salesmanship. In this respect it cannot be said that the Briton is lacking. An American colloquial phrase describes him. Foreign trade " comes natural " to him, but it comes natural only through inheritance. Generation after generation of young Britishers sent abroad have come to know almost instinctively how to build up business for their country. They also have got in the habit of regarding foreign markets as theirs by a sort of divine right. This frequently makes the indi- vidual Briton arrogant and offensive, but it makes the British merchants as a body very powerful in any foreign country. It comes natural for them to act together. Their solidarity is reflected at home, and contributes very greatly to influence British foreign policy. There is also the direct influence of the British busi- ness man or returned merchant who, after a valuable experience in foreign countries, has returned to England. BRITISH TRADE POLICY 107 His familiarity with the needs of British trade abroad makes him a valuable adviser. The belief he imbibed as a young man in his foreign environment that foreign trade belongs by a sort of divine right to England makes him an unconscious, but aggressive, partizan. His in- fluence frequently extends to more direct participation in public affairs. Not infrequently his contributions to his party, or other political services, have secured him a knighthood, a baronetcy, or even a peerage. From this elevated attitude he exercises a greater influence than he could as a mere commoner. The nationalization projects are to be reviewed prin- cipally in relation to what comes after. Nationalizing the munitions factories was purely a military measure and of a temporary character. The virtual nationaliza- tion of the railways was entirely different. It was done over-night, the day following the declaration of war. Laws passed in previous years had provided that the rail- ways should come under government control as soon as war should be declared. The stockholders were com- pletely eliminated from any voice in the management of their property. The Government operated the lines pri- marily with a view to military necessities, but there was no dislocation of the normal relation of transportation to production and consumption. The operation of forty thousand miles of railway was not in itself a difficult matter. The policy of nationalizing the railways per- manently opens many interesting problems, but it may be assumed that under government ownership and op- eration there would be a special regard for the effect of railway rates on overseas trade. Government control of shipping lines is not so simple as the operation of land lines. The nationalization in 108 AMERICAN FOREIGN TRADE this case hardly would be so complete. It would take the form of government direction with a view to intra- and inter-steamship operation rather than of complete ownership. The proposed nationalization of the mines is a much more serious question. They are the basis of England's iron and steel industry, and the iron and steel industry is the foundation of the foreign trade of the United King- dom. The difficulty here is an economic one. There is a limit to wages that can be paid in mines as in other industries. Too high wages, whether in the form of money payments or of reduced working hours, may make production too costly. Conservative British capitalists and industrial lead- ers, representatives of the old regime in finance and trade, have looked somewhat askance at direct participa- tion of the Government in trade and industry. To their minds the policy is fraught with danger. England during the centuries having established her commercial supremacy through private enterprise, and the danger of Germany disputing that supremacy being removed, they see no need of changing the old order. But these objectors are in the minority. Nor is the change so great as it appears to them. At least this is true in so far as relates to foreign trade. It is one of form rather than of substance, a change from a passive to an active atti- tude, but in no way affecting the paternal concern of the Government in the trade of British subjects. In the past the British Government almost auto- matically reflected the will of British business interests throughout the world. They were so widely extended and so potent that its protection and extension often was carried out without conscious motive. The colossal BRITISH TRADE POLICY 109 British capital invested abroad, which formed the out- let for British industry made known its will, and the Government responded. In the future, instead of the Government being the agent, it becomes the principal. It initiates, and trade and industry become its instru- ments. But always and everywhere, and in whatever degree imperial preference may be made effective, Brit- ish interests will be the key to British policy. CHAPTER VIII AMERICAN TEADE POLICY Historic background — Commercial character of early diplomacy — Treaties after the Civil War — Blaine reciprocity conventions — Ding- ley Bill provisions — Cuban reciprocity treaty — Canadian reciprocity agreement — Adoption of double tariff system — Maximum and mini- mum experiment — Repeal by Underwood Act — Review of favored na- tion practice — Reasons for conditional interpretation by United States — Diplomatic correspondence — Cuba and other exceptions — Conclud- ing resumed AMERICAN commercial policy on its foreign side, though vaguely denned, is distinctly na- tionalistic. Viewed in retrospect, this is clearly seen. The prospect may be gathered from it. The interests of the people of the country have been treated as paramount, but without prejudice to friendly intercourse with other peoples and recognition of the special economic circumstances of other countries. Def- inite affirmation is one of the essentials of the position of the United States as a world power in the new era of international commerce. The historic background, from the time when Thomas Jefferson urged reciprocity as the true principle of commerce, affords suggestion. Theodore Lyman, an acute contemporary observer of American diplomacy during the first half -century of the national existence of the United States, asserted that the War of the Revo- lution was in itself, in principle, a commercial one. He remarked : AMERICAN TRADE POLICY 111 "We were not concerned with the dynastic questions and boundaries, and political balances of power that entered into the diplomatic relations of the- European countries. The people, with as little capital as credit, immediately entered upon a course of commerce. . . . The political relations of the United States with Europe became at once minute and ex- tensive because the commerce of the country was so. On that account our diplomacy may be termed altogether of a commercial character; at least its legitimate origin being in commerce, our treaties, for the most part, have consisted of arrangements for the regulation of trade and navigation. 1 " The best book on political economy in that new country," wrote Friedrich List later, " is the volume of life." The Tubingen professor of political economy drew his conclusions from personal experience. As a Pennsylvania farmer and publisher, as a coal-mine oper- ator and pioneer railway-builder, he absorbed the idea of nationality in trade and industry, and returned to Ger- many to write the work which laid the foundation for the German system of protection as developed by Bis- marck. The book of life, as it unfolded, became so distinctly a volume of internal development that gradually inter- national commerce as a chapter of national growth was obscured. In the decade before the Civil War the one important international trade arrangement was the Ca- nadian reciprocity convention of 1854, known as the Elgin-Marcy Treaty. This was both a diplomatic and a commercial agreement between neighbors. It pro- vided for the reciprocal privileges of fishing in the terri- torial waters of each country, and for the use of rivers and canals on equal terms as well as for the interchange i" Diplomacy of the United States," by Theodore Lyman: Boston, 1827. 112 AMERICAN FOREIGN TRADE of commodities. In the commercial sense Canada was the gainer since her natural products found a better market in the United States than the similar products of the United States gained in Canada, and there was no provision for the exchange of manufactured articles. Systematic attempts to expand the foreign market by means of trade treaties came after the Civil War. In some instances, as in the Hawaiian Reciprocity Treaty of 1875, the motive was a political one. The motive also had been political, or national, in the unratified treaty negotiated by Secretary Marcy in 1855. In the treaty of 1875 one purpose was to hold the Pacific outposts. Aus- tralia, as an integral part of the British Empire, was the country then feared to be planning annexation, not Japan. Propinquity and other considerations were mentioned, as well as the free admission of Hawaiian sugar into the United States in return for commercial concessions which were not of equal value. The treaty which was negotiated by General Grant with Mexico in 1883 had as much a political as a com- mercial purpose. After ratification by the Senate, it was left ineffective through the refusal of the House of Representatives to pass the necessary enabling legisla- tion. The treaty negotiated with Spain during Presi- dent Arthur's administration also had a political as well as a commercial object. It related principally to the markets of Cuba, in which profitable concessions were granted on flour and other American products. It was withdrawn by President Cleveland before the Senate could act on it. The reciprocity treaties negotiated in 1890 were the direct outgrowth of Mr. Blaine's demand that the Mc- Kinley Tariff bill should afford the opportunity for en- AMERICAN TEADE POLICY 113 larging the market of the United States in the Ibero- American countries in furtherance of the Pan-American policy of which he was the prophet and protagonist. As secretary of state under President Harrison, Mr. Blaine was unwilling to let slip the opportunity for the practi- cal application of his policy. His spectacular denunci- ation of the bill while it was in process of making, as not extending the market for a single barrel of pork or a bushel of wheat, caused a party majority to change the text and provide for limited reciprocity, on the basis of insuring some concessions for the products of the United States in return for the free admission of raw sugar, molasses, hides and skins, coffee and tea. 1 Reciprocal arrangements were negotiated by John W. Poster as special commissioner with Brazil and other South-American and Central-American countries, with the British and Spanish West Indies, and with Santo Domingo. Germany and Austria-Hungary also con- cluded conventions with the purpose of insuring the market of the United States for their beet sugar. These treaties were nullified by the operation of the Wilson Tariff Act of 1894. The act of 1897, known as the Dingley Tariff, con- tained a remedy for the high duties it carried by pro- viding for reductions through international reciprocity. The reciprocity provisions were contained in two sec- tions. 2 One section authorized the Executive to reduce the duties on argols, or crude tartars, champagne and high-grade spirits, paintings and statuary, in return for equivalent concessions of the products of the United States. Under it limited commercial arrangements with i See Appendix A. Reciprocity Provisions of Tariff Laws. 2 See Appendix A. 114 AMERICAN FOREIGN TRADE several European countries were put into effect. A clause authorizing the President to impose duties on coffee and tea with the purpose of obtaining concessions for the products of the United States was not utilized; but a number of countries were brought within the broader section of the law under which additional ar- ticles could be given a reduction of twenty per cent, from the specified rates of the Dingley Act, or be trans- ferred from the dutiable to the free list. Reciprocal arrangements, negotiated under this section, required to be ratified by the Senate and approved by Congress. John A. Kasson, an experienced legislator and diplomat, acting as the representative of the adminis- tration, negotiated a series of treaties under this section, as well as under the argol section. The coun- tries making the agreements included several of the British possessions in the West Indies and Central- American Republic. The most important of the con- ventions were those negotiated with France and with the Argentine Republic. The latter was known as the Buchanan Treaty, taking the name of the minister who represented the United States at Buenos Aires. President McKinley's unavailing efforts to secure the ratification of these treaties is a comparatively recent chapter in American trade policy. They were unaccept- able to the party majority in Congress, and particularly in the Senate, because they covered some competitive products. With their failure the attempt to moderate the high duties of the Dingley Tariff Law by means of reciprocity treaties ended. The reciprocity treaty with Cuba stands by itself. It had a political as well as a commercial motive. It was negotiated by President Roosevelt's direction in 1902, AMERICAN TRADE POLICY 115 when Cuba was just entering on the experiment of pro- tected independence under the shield of the United States. There were statesmen in Washington who recognized how greatly political stability and progress in self-government in the island depended on economic causes. Sugar is the dominating economic factor in Cuba. The treaty therefore provided for a uniform re- duction of twenty per cent, in the duties on Cuban sugar and molasses imported into the United States, as also on tobacco and fruits and the products of the soil or in- dustry. In return, products of the United States were given reductions in duty ranging from twenty to forty per cent. Entirely aside from its political character, the Cuban Reciprocity Treaty was a fair commercial bargain. The reduction in duties on articles imported into Cuba from the United States was a genuine equiva- lent for the reduced duty on Cuban sugar and tobacco in the United States. The Canadian Reciprocity Agreement submitted to Congress by President Taft in February, 1911, and enacted into law in the following autumn, was a mutual- trade bargain. It provided for the free exchange of a large variety of agricultural products, for reciprocally reduced duties on some manufactured articles, and for special rates on other articles which it was not possible to place on the basis of reciprocal rates. It contained special provisions to insure the United States obtaining print paper. In the interchange of natural products it was true that the Canadian producers had more to transport across the border than would be exported to them, yet American farmers, notwithstanding that they were misled into violent opposition, would have received marked advantages in the wider market for their agri- 116 AMERICAN FOREIGN TRADE cultural products. The failure of the Dominion Parlia- ment to approve the agreement prevented a test of its value to the trade relations of the two countries. President Taft's innovation in presenting the Ca- nadian Reciprocity Agreement to the House of Repre- sentatives had much to commend it. It was not a formal treaty ; it was an agreement between the Government of the United States and the Government of the Dominion of Canada as to the conditions under which they would admit certain products into each other's markets. The agreement was transmitted simultaneously to the Congress of the United States and to the Parliament of the Dominion. In the United States the House of Representatives therefore took original jurisdiction, and the Senate acted after a bill came from the House, as is customary in tariff legislation. Objection was made that Congress could not modify a single provision with- out endangering the entire measure, but the practical aspect was that if new conditions arose during or after the pendency of the legislation the two governments could amend the agreement and submit the amendments to the respective legislative bodies. Actually, there would have been no more difficulty in securing amend- ments than happens with partizan tariff measures where members support the party bill and accept or reject only such amendments as come from the Ways and Means Committee. Another objection to the form followed in the agree- ment was that since a law of this kind is for no definite period, and since Congress may pass subsequent laws repealing or nullifying it, the method has not the value of .treaties, because these are for a fixed and definite period. Theoretically, this argument has force. In AMERICAN TRADE POLICY 117 practice it has no weight. The reason is that Congress usually enacts tariff legislation without regard to treat- ies. The Wilson Tariff Law of 1894 destroyed the pref- erence given the products of Brazil and other countries under the Blaine treaties. They were for a fixed period, but they were terminated immediately when this law went into effect by its automatic operation in respect to the free list and the change in duties. The only recent instance in which Congress in enact- ing tariff legislation has scrupulously observed treaty obligations was in the Payne-Aldrich Act of 1909. This act specifically provided that nothing in it should affect the Cuban Reciprocity Treaty; but the further stipula- tion was made that its provisions as to several European countries with which limited reciprocity conventions covering several commodities were in force should not apply to these commodities until the treaties had been abrogated, after due notice by the Department of State. The Underwood-Simmons Law of 1913 provided that nothing in the act should abrogate, impair, or affect the Cuban treaty except the proviso to Article VIII, which was abrogated and repealed. Article VIII provided that during the existence of the convention no greater reduction than twenty per cent, on Cuban sugar should be allowed and no sugar the product of any other foreign country should be admitted at a lower rate than the existing one. This provision was put into the treaty as a Senate amendment at the insistence of the high protectionists, who did not intend that the Dingley rates should be lowered except to Cuba. The Tariff Act of 1913', however, destroyed the main consideration for reciprocity on the part of Cuba. It provided for free sugar after a brief period, and since 118 AMERICAN FOREIGN TRADE sugar far surpassed the remaining Cuban products, the principal economic reason for the treaty ceased to exist. There was no reciprocal equivalent. Cuba might have considered the free-sugar market of the United States as worth having on the same terms as other sugar-pro- ducing countries, but there was no ground why she should give concessions of from twenty to forty per cent, on a large number of products of the United States to get what other countries obtained for nothing. The need of war revenue while the United States was still a neutral caused the free-sugar provision of the Underwood Act to be repealed. With the continuance of the duty, Cuba was not under the necessity of de- nouncing the treaty and withdrawing the preferential rates given products of the United States. Until the passage of the Payne-Aldrich Act all the trade conventions negotiated by the United States were on the basis of the single schedule system. This law introduced a new principle into American tariff policy, that of the double tariff. The form followed was an adaptation of the conventional tariffs of European countries based on two sets of schedules. Maximum and minimum rates were provided, the minimum being twenty-five per cent, lower than the maximum rates, or, as it was sometimes put, the maximum being twenty- five per cent, higher than the minimum rates. Nomi- nally, the maximum was the basic tariff. Virtually, it was not, since the minimum rates were accepted as the real measure of customs duties. Under this dual tariff commercial relations were ad- justed with one hundred and thirty-four countries. No nation sought to enforce maximum rates against the United States, and all received the minimum rates. AMERICAN TRADE POLICY 119 The maximum and minimum provision was useful in securing removal of discrimination against cotton-seed oil and other American products. For the first time it enabled something to be effected by the diplomacy of commerce in securing more favorable treatment for American live stock and meat products under the re- strictions which were imposed by foreign governments exercising broad police powers in enforcing sanitary regulations. Some of the most acrid chapters in Ameri- can diplomacy were the record of controversies on this subject, particularly with Germany and France. When the Payne-Aldrich law was passed, the people of the United States were consuming the bulk of the meat production, and the question was not a vital one. Nevertheless, advantage was taken of the readjustment of the tariff relations to secure the removal of dis- crimination, which was practiced under administration construction and pure-foo*d and sanitary regulations, al- though neither France nor Germany admitted that their regulations were utilized as disguised measures of pro- tectionism. The whole world, however, knew that the objection was an economic one insisted on by the power- ful agrarian aristocracy of Germany and by the French farmers who wanted American cattle and meats kept out of France. The maximum and minimum experiment was crude, but promising. Its operation showed distinct advan- tages though it also developed defects. Official recom- mendations for curing these defects, and giving the prin- ciple a more effective application had been made when political revulsion changed the party majority in Con- gress and the national administration. The tariff leg- islation following this political change was based on 120 AMERICAN FOREIGN TRADE the single schedule system. The Tariff Act of 1913 car- ried a section authorizing the Executive to negotiate commercial treaties, which should be submitted to Con- gress ; but this provision gave the President no authority that he did not already possess. The historic background of American trade policy would be lacking without inclusion of the favored-nation treatment. In retrospect and in prospect it is equally important. The principle found expression in the first treaty of amity and commerce that the colonies were able to con- clude. This was the treaty with France, ratifications of which were exchanged at Paris in July, 1778. It contained the favored-nation clause in the form which afterward became the subject of controversy. The treaty of 1800 with France, which also contained the favored-nation article, expired by limitation in eight years, and was not renewed. The treaty for the cession of Louisiana recognized that concessions of a political character were a valid basis of exchange for concessions of a commercial character. France, however, disagreed with the interpretation which the United States put on the article providing that the ships of France should be treated upon the footing of the favored nation in Amer- ican ports. The misunderstanding was cleared by the treaty of 1831. In this convention the principal of reciprocity was recognized, and it was also recognized that, to be mutu- ally advantageous, political as well as commercial con- siderations should be taken into account. The United States agreed to reduce the duties on French wines for a period of ten years, in return for which France not only reduced the duty on long-staple cotton imported AMERICAN TRADE POLICY 121 from the United States, but relinquished her claims and reclamations respecting the disputed article of the Louisiana Cession. The conditional construction put on the favored-na- tion clause by the United States has been reasonably uniform. In the earlier treaties navigation was a lead- ing feature of favored-nation treatment. The United States not only had a commerce of its own to carry, but was the carrier through its merchant marine of the commerce of other countries. Equality with the ship- ping of other nations in foreign ports was therefore important. One of the clearest expositions of the conditional construction was given a full century ago in somewhat unique circumstances. In the revolt of the Spanish- American colonies, the province of Buenos Aires had sent an agent to the United States, named David V. Forrest. He sought to be received as consul-general, and in making his request proposed special favors in return for recognition. John Quincy Adams, secretary of state, under date of May, 1818, wrote in regard to this aspect of his plea, and without reference to the political question, as follows : It had not been intended to suggest to Mr. de Forest that it was in any manner incompatible with the independence or sovereignty of a nation to grant commercial advantages to one foreign state and withhold them from another. If any such advantage is granted for an equivalent, other na- tions can have no right to claim its enjoyment, even though entitled to be treated as the most favored nation, unless by the reciprocal grant of the same equivalent. American national policy has been to secure identical treatment with favored-nation countries under identical 122 AMERICAN FOREIGN TRADE or similar circumstances. The equivalence clause, which is specifically set forth in most of the commercial treaties, and inferentially stated in the others, provides that commercial favors granted to third countries shall be enjoyed by the party claiming most favored-nation treatment gratuitously, if so granted, or for equivalent compensation if granted for a price. The French treaty of 1778, as previously stated, was one of the first in which the favored-nation clause was inserted. The Treaty of Ghent, following peace with England, stated the favored-nation treatment very clearly. The conditional construction as it has been adhered to by the United States, and has been upheld by the Su- preme Court, is set forth in the diplomatic correspond- ence of many administrations. One of the clearest ex- positions was that made by Secretary Frelinghuysen in the instructions to Mr. Bingham, the American Minister at Tokio, in 1884, in conection with a diplomatic con- troversy with England. In this communication the sec- retary of state said : The English contention has hitherto been, under the most- favored-nation clause of the treaties, that it is absolute, and that even when Japan may bargain with any power to give it a favor for an equivalent, the like favor must be granted to England without equivalent. The Japanese contention is the reverse of this, being that if a favor for a specific condition be stipulated with any one nation no other may enjoy the favor except upon iden- tical or equivalent conditions. The theory on which this Government views the question is akin to that of Japan. For example, the United States have just concluded a commercial treaty with Mexico by which each country especially favors the other by putting on its free list certain dutiable products. Under the favored- AMERICAN TRADE POLICY 123 nation clause of our treaties with other nations we are not bound to give their products the benefit of our free list, even though such country may not impose any duty on the arti- cles which Mexico has free listed in our favor. But we would be willing to stipulate to give a third power the favor we give Mexico in exchange for some equivalent favor not gen- eral as toward the rest of the world. 1 The bearing of the favored-nation clause as construed by the United States on reciprocity treaties is found in the diplomatic correspondence relating to the Hawaiian Reciprocity Treaty and the Cuban Reciprocity Treaty. In the case of Cuba, efforts to break the force of the agreement were made by several countries, notably by Germany. The United States declined to recognize the contentions put forward by foreign governments. There was not only the relation of proximity, but there were other special considerations, among them the exceptional nature of the status of Cuba in respect to the United States as recognized by the Cuban Constitutional Con- vention in incorporating the Piatt Amendment and in other ways. The contention was not seriously pressed by any of the foreign governments. Their representa- tions were more in the nature of manceuvers to feel out the intention of the United States. After the Canadian Reciprocity Agreement was ne- gotiated, several governments also raised questions as to the application of favored-nation treatment. The representations were generally of an informal character. The United States consistently replied that propinquity i For a concise review of the subject see " Reciprocity Treaties, Fa- vored Nation Clauses," by John Ball Osborne, of the Department of State, Senate Document No. 29, 62nd Congress, 2nd Session. See also Moore's " International Law Digest " and the Tariff Commission's Re- port on Reciprocity and Commercial Treaties, 1919. 124 AMERICAN FOREIGN TRADE and other considerations of a special character took the reciprocity agreement out of the favored-nation treat- ment. A paragraphic resume such as has been given in the preceding pages may be thought an inadequate presenta- tion of the historic element in tariff legislation and trade policy. But the American public mind is an im- patient public mind ; it cares little for the past, and is willing to absorb the teachings of experience without moralizing on them, if there be any moral. The truth is that in the varying moods of the American people on the tariff as a domestic measure, reactions from one extreme to another, from tariff boosting to tariff smashing, and so on around the circle, have afforded small field for the evolution of a consistent policy in relation to foreign commerce. There was, moreover, the lack of interest in foreign trade as a means of expanding domestic production. But in the new era, with the world-wide developments, the imperative necessity exists of determining the basis of future trade relations. CHAPTER IX AMERICAN TRADE POLICY (CONTINUED)' Adjustment of United States commerce to competitive conditions — Flexible and inflexible tariffs — Defects in maximum and minimum pro- visions of the Payne-Aldrich Act — Amendment proposed by Secretary Knox — Rejected retaliatory clause in Underwood bill — Tariff Com- mission's approval of retaliatory schedules — Means of securing equality of treatment for American goods — Bargaining tariffs — House of Rep- resentatives as source of revenue legislation — Dyes and potash — Ex- port combinations — The Webb-Pomerene Law — Price-lists abroad and at home — Export railway rates — Objections to government control — Individual enterprise in foreign business. WORLD trade is competitive trade. That is one of the commonplaces of international commerce which the United States must recognize in determining its own policy. But there are other facts to be recognized as conse- quences of the Great War which must be taken in connection with the competitive nature of world trade. One is the resurgence of nationalism reflected in the fiscal and economic legislation of the several commercial nations. England in her adoption of imperial prefer- ence and in her measures for stimulating and fomenting British industry in its effects abroad is the most striking example. Yet other countries also supply illustrations. The United States must readjust its trade relations as they will be modified and affected by the policies of other nations. It must view the so-called neutral mar- kets in their detached aspect and also as influenced 125 126 AMERICAN FOREIGN TRADE by the competition of European countries. It must de- termine the amount of protection which shall be given domestic industries in the light of the activities of the country seeking its market, as well as with regard to the revenues to be raised from customs duties. With a benign international policy already determined, it will not be possible, nevertheless, to ignore the knowledge that as a world power in international commerce the United States still believes in its own nationalism in commercial intercourse. Two lines of activity call for determination. One relates to the fiscal and economic policy which shall be formulated and made effective by the legislative branch of the government. The other relates partly to ad- ministrative measures resting on legislative enactment, and partly to the degree of participation or non-partici- pation of the Government in foreign trade. In making treaty arrangements it may be assumed that the United States will continue to adhere to the conditional favored-nation treatment. Nothing in the domestic situation calls for a change, and the readjust- ment of the trade policies of other nations does not furnish ground for the United States reversing its his- toric policy. Whether, in the commercial treaties ne- gotiated by European countries, the unconditional favored-nation clause be abandoned, or whether it be re- tained does not seriously concern the United States. The conditional construction has worked well for it and the tendency will be to assume that this construction will still work satisfactorily. A more vital question than favored-nation construc- tion relates to general tariff policy. The question of the future, in view of the economic policies in process AMERICAN TRADE POLICY 127 of adoption by other countries, is whether American trade policy shall be based on an inflexible Or a flexible tariff. This is said without regard to political views. What the United States wants in order to give free op- portunity for its expansion into foreign trade is equality in the markets of the world. This was the fundamental proposition on which the maximum and minimum tariff of 1909 was adjusted. In some instances where, from the nature of the trade inter- course, there could be no exact equivalency, the principle of compensatory concessions was adopted, though the main purpose was never lost sight of. This was that there should be no unjust discrimination against Ameri- can goods. The President, through his subordinates, de- termined in the light of actual circumstances what were unjust discriminations and what were just ones. That is, what were inherent in the conditions of the trade of the several countries which justified discrimination and what were unfriendly. The plan followed sought no favors for the United States; it merely sought free opportunity with other competitors in open markets. The defects of the maximum and minimum provision have been indicated in the previous chapter, together with some of the remedies proposed for overcoming them. They call for further exposition. The principal defect was the lack of adaptability. The mere enactment of two schedules or sets of duties gave little elasticity. The maximum schedule was, in fact, prohibitive, and its application to any country would have meant an out- right trade war, which could not have depended upon public sentiment for support. After the full possibili- ties of the tariff of 1909 had been exhausted, the neces- sity of a more elastic scale of duties became apparent. 128 AMERICAN FOREIGN TRADE Experience also demonstrated that under a dual tariff the establishment of a rigid free list was not good com- mercial policy. The Department of State, after an experience of two years in seeking equal opportunities for American goods in foreign markets, proposed a remedy. This was out- lined in a letter of Secretary Knox to the Ways and Means Committee in December, 1911. The secretary of state, after reciting the advantages which had been ob- tained under the maximum and minimum provisions, and the concessions made by various countries, explained where discriminations were still practised and where American trade was at a disadvantage. He remarked that similar instances of discrimination as between Eu- ropean nations found adjustment through means at hand for specific retaliation where conciliatory measures had failed. An amendment to Section 2 — that is, the section con- taining the schedules and the free list — was submitted by Secretary Knox. It provided for varying rates to be added to the minimum rate, not less than five per cent, ad valorem, and not exceeding twenty-five per cent., ap- plicable by proclamation when, through the investiga- tions made at the instance of the President, he should become satisfied that another nation's laws or practices as relating either to tariffs or commercial methods hav- ing governmental sanction were inimical to that equal opportunity for trade and commerce to which American enterprise was fairly entitled. The secretary of state de- clared : It is realized that the gravity of the offense should be met by a suitable remedy, one that may be graduated to meet the degree of embarrassment sought to be corrected. This AMERICAN TEADE POLICY 129 might call for the imposition of additional duties of from five to twenty-five per centum upon a few commodities, or it might require that all of a nation's exports to the United States should be made subject to rates of duty higher than the existing minimum. Instances might arise where, to sub- ject commodities now upon the free list to the payment of duties would be found to be the only measure of relief for offiensive treatment; or the prohibition of imports in aggra- vated cases might be necessary. 1 - An adverse political majority in Congress did not take kindly to these suggestions. The proposed amendment died in the Ways and Means Committee. The revulsion of political sentiment which continued until a national administration of the opposite party came into power resulted in the complete wiping out of the maximum and minimum principle in tariff legislation. Yet while the bill was under discussion, which resulted in the Tariff Act of 1913, consideration was given to the recommenda- tions made by the previous national administration. In the Senate an amendment was offered to the House bill which sought to meet the situation described, and to secure equality of opportunity for American goods in countries which might discriminate. The amendment provided that the President should have power to sus- pend the rates assessed upon the importation of certain specified articles, and to substitute new rates, which were set forth in detail. Among the commodities upon which increased duties were to be laid were fish, coffee, tea, lemons, chinaware, coal, cheese, wines of all kinds, malt liquors, knitted goods, silks, laces and embroideries, jewelry, sugar and molasses and wool. The amendment was adopted by the Senate, but was i See Appendix Ai for text of the Knox amendment. 130 AMERICAN FOREIGN TRADE stricken out in conference with the House and the tariff of 1913 became effective without any provision for secur- ing equality of treatment for American products in for- eign markets. 1 Experience with the tariff measure of 1913 under war conditions could not be looked on as a satisfactory means of determining whether or not retaliatory pow- ers were necessary. But the Tariff Commission, looking to the future and judging in the light of its own investi- gations, apparently reached the conclusion that means of retaliation are desirable. In its report on Reciproc- ity and Commercial Treaties it endorsed the principle of retaliatory schedules and made recommendations fol- lowing closely the maximum and minimum tariff pro- visions as they had been advocated by Secretary Knox. President Wilson in his message THE AMEKICAN BUSINESS MAN 311 thing in him, cannot be held back by artificial barriers. While it is desirable that there should be more busi- ness men in Congress, yet it must be recognized that the driving nature of American commerce and industry does not encourage the expectation that there will be many who can mix in public affairs and become congressmen before they are forty. Consequently, the country will continue to look to the lawyer-politicians for legislation, and the most that can be expected is that business men will exercise their influence more directly and with bet- ter organization than has been customary. Law-making — that is, constructive law-making — is complicated work, and requires a knowledge of many subjects and their relation one to another. It calls for a long apprenticeship. The pages of the Congressional Directory are speaking testimony to the nature of this apprenticeship. The biographies of the individual mem- bers are records of service as state's attorneys or prose- cuting attorneys, as county judges and circuit judges, and as representatives and senators in the legislatures of the States. This is the natural progression toward a seat in Congress, and it is another explanation of why the lawyer-politicians always will be in the numerical preponderance. They get to Congress after constant service in other positions in which knowledge of the law and its application are constantly put into practice. On one subject the business man in Congress, if he chooses to assert himself, is on a full equality with the lawyer-politicians who are his colleagues. This is for- eign affairs. Students of the congressional system and executive officials in Washington who have to bear largely the responsibility of conducting the relations of the United States with other governments have com- 312 AMERICAN FOREIGN TRADE mented discouragingly on the ignorance and indifference of members of Congress to the relations of the United States with foreign countries. It is not due to lack of patriotism, for ordinarily all that the congressmen want to know is what the Govern- ment considers the patriotic thing to be done, and when that is known, they will do their part. But it is diffi- cult to persuade them to study and learn something about the circumstances which govern the policies of other countries. There is a simple, if not a satisfying, reason for this ignorance. It is the lack of interest on the part of their home people in anything outside of the immedi- ate environment. The post-office and other patronage, the appropriation for a public building, the amount of the district's share in the River and Harbor Bill, are of much more consequence. For that reason the represen- tative gives his time to them. It is doubtful whether at any time the House of Rep- resentatives, out of more than four hundred members, has a score who are interested in foreign affairs, and who take the pains to inform themselves so as to act intelligently on international questions. The Senate, partly because of its share in the treaty-making power, has a larger proportion than the House, but it is nothing to boast of. There are few senators who would seek a place on the Foreign Relations Committee in preference to a place on the Committee on Commerce which con- trols the river and harbor allotment, on Appropriations, or even on Public Buildings. The Spanish-American War enlarged the horizon of foreign relations, but the effect was not noticeably broad- ening in the education of Congress as a body. The Great War has done more, because it is so far vaster in its THE AMEKICAN BUSINESS MAN 313 causes and in its consequences ; but even here it is not certain that there will be a marked increase in the num- ber of senators and representatives who care to inform themselves fully, so as to understand world affairs in their bearing on the foreign relations of the United States. The business man who is interested in foreign trade, by that very fact should be better fitted to form a judg- ment on international policies than the congressman whose greater interest is in the local affairs of his dis- trict. Yet in the past he has not measured up to the standard of knowledge which might be expected of him either regarding the proper functions of his own Govern- ment in connection with trade or the requirements of for- eign markets. The antagonistic attitude of one class of business men to their own Government and their misun- derstanding of its functions in extending their business abroad affords some amusing illustrations. It was the manufacturer of a highly protected com- modity who, on receiving a report from his European agent that Sweden was about to impose a tariff on his product for the purpose of encouraging its manufac- ture, wrote an urgent letter to the Department of State, demanding that immediate action be taken to prevent Sweden from adopting this tariff duty. It was a manu- facturer of wire products who had established a branch factory in one of the South American countries, because the domestic policy was to encourage the manufacture there rather than importation, who wrote an indignant remonstrance to the department for not protesting when that country proposed to change its policy and lower the duty on the article in question. His branch factory was fully established and able to meet competition, but he 314 AMERICAN FOREIGN TRADE could not see why the Government of the United States should be willing that home manufacturers should take advantage of this opportunity for trade expansion. It was an association of manufacturers which formally de- manded that the Government of the United States " com- pel " one of the provinces of Canada to repeal its regu- lation for a license tax, notwithstanding that the tax was required not only from commercial travelers from all countries without discrimination, but from the other provinces of the dominion as well. These instances of the lack of comprehension of the proper functions of the Government in relation to trade intercourse could be multiplied, but they are of little importance in comparison with the discouraging chap- ter of foreign-trade forays. How recent is the series of indignant reports from American consuls and from spe- cial agents of the Department of Commerce which poured into Washington on the deficiencies of the American manufacturers who were seeking business abroad! Prom the settled commercial centers of Europe, whose practices had been fixed for generations, they came. From the much sought-after South American market they flowed in endless tide. From China and Japan and remoter regions of the world where there were oppor- tunities to sell American goods they drifted in. They were all of the same order. Innumerable in- stances of bad packing, with the inevitable indignation of consignees and imperative demands for damages ; fail- ure to live up to samples, with the consequent disappoint- ment of the importers ; deficient postage ; absolute indif- ference to specifications made by the importers with a view to meeting local requirements; refusal to fulfil orders which had been sought after, but later disregarded THE AMEKICAN BUSINESS MAN 315 because, when the order was received, the home market had quickened and the articles could be sold at greater profit; dumping of second-rate commodities, often an accumulated surplus, and oftener inferior stock which had to be got rid of, and which it was considered fair gain to unload on the hapless foreigner; failure to accept repeat orders when an importer had created a market for the American goods because renewed indus- trial activity had insured a better profit at home; de- mands for cash with order when specific agreement had been made for credit; indifference to drafts previously authorized, and frequently insulting reflections on the financial ability and integrity of the consignee! This was the chapter. There were several causes for this series of consular letters and reports. In the first place, the American manufacturer who was guilty of these practices still looked on foreign orders as something sporadic and spas- modic, and only to be sought in order to dispose of sur- plus stock. In other words, the foreign field was viewed purely as a dumping-ground for temporary purposes. Ignorance of packing methods was simply inexcusable. Indifference to the trade requirements of other mar- kets was partly due to American self-sufficiency. It as- sumed that what was suitable to the domestic consumer should suit the foreign consumer. There was also mani- fest something of the inherent contempt of the provincial American for all things foreign. Unfortunately, there was not always the highest standard of commercial in- tegrity. Sharp practices, which were condoned at home, it was assumed would be condoned abroad. These criticisms happily related only to certain per- sons and to small concerns. They never were true of 316 AMERICAN FOREIGN TRADE the half score of great corporations which went into the foreign field with the purpose of cultivating it as a per- manent market, and which still do the bulk of the export business of the United States. These big companies did not pack their goods carelessly ; they did not abruptly and without explanation fail to fill orders which they had sought ; they did not merely dump their surplus, or unload on the foreigner second-hand and unsalable goods. They sought to meet the local-trade require- ments. They studied credit conditions in advance, and once having secured customers, they kept them. When the active period at home succeeded the dull times, and the domestic demand exceeded the capacity, neverthe- less they continued to fill their foreign orders. It is the big manufacturing companies which have re- deemed the American name abroad. A single firm or person, by sharp practice or dishonorable methods, and by failure to keep engagements made, provokes an outcry that causes the reliable firms to be overlooked temporar- ily. It is simply the case of evil receiving publicity where good is accepted as a matter of course. But though the example of the big companies seems to be ignored, this is not really so. Their correct methods and their close attention to keeping scrupulously their foreign trade engagements have laid the deep and solid foundation on which the whole structure of American trade abroad may be built. The individual sinner through persistent reiteration of his sins and of the need of reforming his methods may be brought to repentance. The educational campaign against bad packing, dumping inferior goods, failure to live up to agreements, cancellation of orders accepted, and the long train of transgressions which justly were THE AMERICAN BUSINESS MAN 317 laid to the door of many American manufacturers is bearing fruit. A higher sense of responsibility in deal- ing with foreign customers is now shown. Where there are shirkers and slackers, the only remedy is to crowd them out of foreign trade entirely. For the business man who for the first time is seeking to sell his goods abroad his aloofness in domestic matters becomes one of apprehension in foreign affairs. He is literally bewildered, and venturing into untried fields he shows his bewilderment. He feels that he does know something about home concerns, but when he is adrift in the big world he is helpless. This sense of isolation is to-day the greatest drawback to the American business man who is seeking to obtain a share of foreign trade. He lacks the psychological sense to place himself in the midst of other and distant surroundings. The failure to comprehend foreign cus- toms and requirements is due to this lack of insight. The business man does not realize that there is another world of trade in which the point of view is entirely different from his own. The Government, by its numer- ous agencies, has tried and is trying to give the American business man this sense of the foreign point of view. It seeks to take him out of his own environment and set him down in an entirely different one thousand of miles away, to coordinate its resources with his enterprise. The war taught some valuable lessons regarding the coordination of the business man's energies with those of the Government. They furnish a useful avenue of approach to the coordination of government agencies in promoting foreign trade. Few business men realize the degree to which the Department of State as the me- dium of foreign intercourse has been molded to advance 318 AMERICAN FOREIGN TRADE their interests. They have some knowledge of the ac- tivities of the Department of Commerce, because the name appeals to them. It is barely a decade since an appropriation of $50,000 was secured by President Roosevelt's administration for developing foreign trade through that instrumentality. The pioneer work un- der that modest appropriation caused a broad foundation to be laid, and a solid one, too, so that now more than $1,000,000 is annually devoted to this purpose, and every part of the world is scoured by experts able to give tech- nical as well as general information. The Federal Trade Commission has added foreign markets to its func- tions, and the Tariff Commission likewise takes excur- sions into this inviting field. There is much overlapping and duplication in this work, but its value, while somewhat obscured by this overlapping, is undeniable. What is needed is a clear- ing-house to digest all the information gathered and make it accessible to the ordinary man. This suggestion might be looked upon as an incitement to create another board, with all the appurtenant machinery, but that is not the purpose. The clearing-house should be com- posed of existing bureau officials. Yet, despite the du- plication, and notwithstanding the absence of proper di- gestive facilities, the value of the work done by the Gov- ernment should be appreciated, and business men should take advantage of it and coordinate their energies with its activities. There is the further opportunity for cooperation by manufacturers and exporters among themselves. No one should minimize the signal service which the great exporting corporations have done for American com- merce in their perfectly legitimate efforts to extend their THE AMERICAN BUSINESS MAN 319 own business. It is they who have in reality created markets for American goods. They are deeply inter- ested in all questions of general policy relating to for- eign trade, and they are not so strong that the govern- ment agencies can be neglected by them. But from the large capital at their command, and from the nature of corporations, they are fairly able to take care of them- selves. In any growth of trade in the future they will have their due proportion, but it is the small manu- facturers who, taken as a body, must be the principal instrumentalities of enlarged markets. Twenty thousand small manufacturers selling their goods abroad add enormously to the total sales, yet the amount for each individual firm or company may rela- tively be so small that it is impossible for it to develop an export business for itself, and the individual members are timid about venturing by themselves. The remedy is in association, in cooperation with their fellows. Their feeling of isolation can be overcome by associating themselves with other lonesome business men who also want to do business abroad. A feeling of confidence thus may be created, and the foreign field may cease to be one to be desired, but not to be approached through fear of rebuffs. What the situation requires is that the smaller manufacturers be provided with means for ex- porting a certain portion of their products. They have the goods, and the problem is to find the market. This can be done by cooperation. Henceforth world commerce is the business of the Uni- ted States. This country is in world politics. It can- not, if it would, keep out of world business. Yet there are definite limitations on the functions of the govern- ment. It can gather and disseminate information of 320 AMERICAN FOREIGN TRADE value to American manufacturers and exporters in their quest for world markets. It can exercise the diplomacy of commerce in the light of changed world conditions and the delicate readjustments to meet them. It is bound to have numerous tariff adjustments and prob- ably to negotiate an intricate network of trade treaties. These treaties will be the foundation of American trade policy whenever the American people clearly express their views on the trade that follows the war and the means the United States shall exercise in obtaining a proportionate share of it. The promise of the new era, which will be an era of competition, is nevertheless of closer relations between the civilized nations of the world. The education of the American public in international relations as the conse- quence of the Great War carries with it the prospect of a wide popular education in regard to commerce with other countries. The business man has his part in this education. His first step should be to educate himself in what constitutes the essentials of foreign trade and the conditions under which it may be fostered. This done, he will be in a position to help the education of those who are not directly interested, but who have the indirect interest that comes from the effect of enlarged foreign markets on domestic prosperity. Back of it all must be cooperation of the business men among themselves and coordination with the Govern- ment. There must be recognition that the American business character finds its strongest expression in indi- vidual enterprise and in initiative of its own. Where other governments are tending toward a larger measure of actual participation in the enterprises of their nation- als, the United States should remain as the exemplar of THE AMERICAN BUSINESS MAN 321 individualism in international business. That is real democracy. It is the enduring foundation for expanding American trade in the new era of international com- merce. APPENDIX A — RECIPROCITY AND RETALIATORY TARIFF PROVISIONS 1 — MCKINLEY ACT OP OCTOBER 1, 1890 Sec. 3. That with a view to secure reciprocal trade with countries producing the following articles, and for this pur- pose, on and after the first day of January eighteen hundred and ninety-two, whenever, and so often as the President shall be satisfied that the Government of any country producing and exporting sugars, molasses, coffee, tea, and hides, raw and uncured, or any of such articles, imposes duties or other exactions upon the agricultural or other products of the United States, which in view of the free introduction of such sugar, molasses, coffee, tea, and hides into the United States he may deem to be reciprocally unequal and unreasonable, he shall have the power and it shall be his duty to suspend, by proclamation to that effect, the provisions of this act relating to the free introduction of such sugar, molasses, coffee, tea, and hides, the production of such country for such time as he shall deem just, and in such case and during such sus- pension duties shall be levied, collected, and paid upon sugar, molasses, coffee, tea, and hides, the product of or exported from such designated country as follows, namely: All sugars not above number thirteen Dutch standard in color shall pay duty on their polariscopic tests as follows, namely : All sugars not above number thirteen Dutch standard in color, all tank bottoms, sirups of cane juice or of beet juice, melada, concentrated melada, concrete and concentrated mo- lasses, testing by the polariscope not above seventy-five de- grees, seven-tenths of one cent per pound; and for every ad- 322 APPENDIX 323 dition degree or fraction of a degree shown by the polar- iscopic test, two hundredths of one cent per pound additional. All sugars above number thirteen Dutch standard in color shall be classified by the Dutch standard of color, and pay duty as follows, namely: All sugar above number thirteen and not above number sixteen Dutch standard of color, one and three-eighths cents per pound. All sugars above number sixteen and not above number twenty Dutch standard of color, one and five-eighths cents per pound. All sugars above number twenty Dutch standard of color, two cents per pound. Molasses testing above fifty-six degrees, four cents per gal- lon. Sugar drainings and sugar sweepings shall be subject to duty either as molasses or sugar, as the case may be, accord- ing to polariscopic test. On coffee, three cents per pound. On tea, ten cents per pound. Hides, raw or uncured, whether dry, salted, or pickled, Angora goatskin, raw, without the wool, unmanufactured, asses' skins, raw or unmanufactured, and skins, except sheep- skins, with the wool on, one and one-half cents per pound. 2 DINGLET ACT OF JULY 24, 1897 Sec. 3. That for the purpose of equalizing the trade of the United States with foreign countries, and their colonies, pro- ducing and exporting to this country the following articles: Argols, or crude tartar, or wine lees, crude; brandies, or other spirits manufactured or distilled from grain or other materials; champagne and all other sparkling wines; still wines and vermuth; paintings and statuary; or any of them, the President be, and he is hereby, authorized, as soon as may be after the passage of this Act, and from time to time there- after, to enter into negotiations with the governments of those countries exporting to the United States the above-mentioned articles, or any of them, with a view to the arrangement of commercial agreements in which reciprocal and equivalent concessions may be secured in favor of the products and man- 324 AMERICAN FOREIGN TRADE ufactures of the United States; and whenever the govern- ment of any country, or colony, producing and exporting to the United States the above-mentioned articles, or any of them, shall enter into a commercial agreement with the United States, or make concessions in favor of the products, or manu- factures thereof, which, in the judgment of the President, shall be reciprocal and equivalent, he shall be, and he is hereby, authorized and empowered to suspend, during the time of such agreement or concession, by proclamation to that effect, the imposition and collection of the duties mentioned in this Act, on such article or articles so exported to the United States from such country or colony, and thereupon and thereafter the duties levied, collected, and paid upon such article or articles shall be as follows, namely: Argols, or crude tartar, or wine lees, crude, five per centum ad valorem. Brandies, or other spirits manufactured or distilled from grain or other materials, one dollar and seventy-five cents per proof gallon. Champagne and all other sparkling wines, in bottles con- taining not more than one quart and more than one pint, six dollars per dozen ; containing not more than one pint each and more than one-half pint, three dollars per dozen; con- taining one-half pint each or less, one dollar and fifty cents per dozen; in bottles or other vessels containing more than one quart each, in addition to six dollars per dozen bottles on the quantities in excess of one quart, at the rate of one dollar and ninety cents per gallon. Still wines, and vermuth, in casks, thirty-five cents per gallon; in bottles or jugs, per case of one dozen bottles or jugs containing each not more than one quart and more than one pint, or twenty-four bottles or jugs containing each not more than one pint, one dollar and twenty-five cents per case, and any excess beyond these quantities found in such bottles or jugs shall be subject to a duty of four cents per pint or fractional part thereof but no separate or additional duty shall be assessed upon the bottles or jugs. Paintings in oil or water colors, pastels, pen and ink draw- ings, and statuary, fifteen per centum ad valorem. APPENDIX 325 The President shall have power, and it shall be his duty, whenever he shall be satisfied that any such agreement in this Section mentioned is not being fully executed by the Government with which it shall have been made, to revoke such suspension and notify such Government thereof. And it is further provided that with a view to secure reciprocal trade with countries producing the following ar- ticles, whenever and so often as the President shall be satisfied that the Government of any country, or colony of such Gov- ernment, producing and exporting directly or indirectly to the United States coffee, tea, and tonquin, tonqua, or tonka beans, and vanilla beans, or any such articles, imposes duties or other exactions upon the agricultural, manufactured, or other products of the United States, which, in view of the introduction of such coffee, tea, and tonquin, tonqua, or tonka beans, and vanilla beans, into the United States, as in this Act hereinbefore provided for, he may deem to be recipro- cally unequal and unreasonable, he shall have the power and it shall be his duty to suspend, by proclamation to that effect, the provisions of this Act .relating to the free intro- duction of such coffee, tea, and tonquin, tonqua, or tonka beans, and vanilla beans, of the products of such country or colony for such time as he shall deem just; and in such case and during such suspension duties shall be levied, collected, and paid upon coffee, tea, and tonquin, tonqua, or tonka beans, and vanilla beans, the products or exports, direct or indirect, from such designated country, as follows: On coffee, three cents per pound. On tea, ten cents per pound. On tonquin, tonqua, or tonka beans, fifty cents per pound ; vanilla beans, two dollars per pound; vanilla beans, com- mercially known as cuts, one dollar per pound. Sec. 4. That whenever the President of the United States, by and with the advice and consent of the Senate, with a view to secure reciprocal trade with foreign countries, shall, within the period of two years from and after the passage of this Act, enter into commercial treaty or treaties with any other country or countries concerning the admission into any such country or countries of the goods, wares, and mer- 326 AMERICAN FOREIGN TRADE chandise of the United States and their use and disposition therein, deemed to be for the interests of the United States, and in such treaty or treaties, in consideration of the ad- vantages accruing to the United States therefrom shall pro- vide for the reduction during a specified period, not exceeding five years, of the duties imposed by this Act, to the extent of not more than twenty per centum thereof, upon such goods, wares, or merchandise as may be designated therein of the country or countries with which such treaty or treaties shall be made as in this section provided for; or shall provide for the transfer during such period from the dutiable list of this Act to the free list thereof of such goods, wares, and mer- chandise, being the natural products of such foreign country or countries and not of the United States; or shall provide for the retention upon the free list of this Act during a specified period, not exceeding five years, of such goods, wares, and merchandise now included in said free list as may be designated therein; and when any such treaty shall have been duly ratified by the Senate and approved by Congress, and public proclamation made accordingly, then and there- after the duties which shall be collected by the United States upon any of the designated goods, wares, and merchandise from the foreign country with which such treaty has been made shall, during the period provided for, be the duties specified and provided for in such treaty, and none other. 3 — PROPOSED KNOX AMENDMENT TO TARIFF OF 1909 Be it enacted, That section two of an act entitled ' ' An act to provide revenue, equalize duties, and encourage the in- dustries of the United States, and for other purposes," be, and is hereby, amended so as to read as follows : ' ' Sec. 2. That from and after the passage of this act, and so long thereafter as the President of the United States shall be satisfied that the government of any foreign country im- poses any terms or restrictions, either in the way of tariff rates or provisions, trade or other regulations charges, ex- actions, or in any other manner, directly or indirectly, upon the importation into or the sale in such foreign country of any agricultural, manufactured, or other product of the APPENDIX 327 United States, which unduly discriminate against the United States or the products thereof, and that such foreign country pays no export bounty or imposes no export duty or prohibition upon the exportation of any article to the United States which unduly discriminates against the United States or the products thereof, and that such foreign country ac- cords to the agricultural, manufactured, or other products of the United States treatment which is reciprocal and equiva- lent, all articles when imported into the United States, or any of its possessions (except the Philippine Islands and the islands of Guam and Tutuila), from such foreign country shall be admitted under the terms of the minimum tariff of the United States as prescribed by section one of the tariff act of August fifth, nineteen hundred and nine. Any proclama- tion issued by the President under the authority herein con- ferred and the application of the minimum or other tariff rates may, in accordance with the facts as found by the Presi- dent, extend to the whole of any foreign country, or may be confined to or exclude from its effect any dependency, colony, or other particular subdivision having authority to adopt and enforce tariff legislation, or to impose restrictions or regula- tions, or to grant concessions upon the exportation or impor- tation of articles which are, or may be, imported into the United States : Provided, That whenever the President of the United States shall be satisfied that the conditions with respect to any country, which led to the application of the minimum tariff hereinafter authorized, no longer exist, or that the gov- ernment of any foreign state, by repressive, discriminatory, or confiscatory measures, either of legislation or of administra- tion, jeopardizes, impairs, or destroys the capital of citizens of the United States legitimately invested in such foreign state ; or whenever the President shall be satisfied that new dis- criminations are made or that relative treatment not equiva- lently favorable is given by or under the authority of any foreign state adversely affecting the importation into or sale in such foreign state of any product of the United States ; or that the government of such foreign state, whether by law or by administrative measures, imposes exactions, regulations or limitations restrictive of or harmful or amounting to relative 328 AMEKICAN FOKEIGN TEADE treatment not equivalently favorable to the commerce of the United Etates with such foreign state with respect to the imports into or exports from such state ; or if a foreign state, with respect to its exports to other foreign or neutral markets, seeks by law or by administrative measures, to provide for the payment of bounties, rebates of duties or allowance upon ex- ports in such a manner as to affect adversely the commerce of the United States established with foreign or neutral markets, he shall direct that such increased ad valorem rates of duty as he shall determine are equivalent to the injury inflicted upon American capital or commerce shall be imposed upon imports of all or such duty-free products of such foreign state as he may deem proper, provided that in no case shall the additional duty so imposed be less than five per centum nor more than twenty-five per centum ad valorem ; or he may direct that the like ad valorem rates of duty shall be imposed upon importa- tions of all such duty-free products of such foreign state as he may deem proper, or upon both dutiable and duty-free importations, or, in what the President shall be satisfied are extreme eases of new discrimination and unjust treatment of the commercial or foreign interests of citizens of the United States on the part of such foreign state, he may direct that such products of such foreign state as he may deem proper shall be excluded from importation to the United States ; that whenever the President shall be satis- fied that any of the above-described conditions exists he shall issue a proclamation to this effect, and ninety days thereafter all the dutiable imports into the United States from the offending foreign state, or such of the dutiable products as are named in the proclamation, being the product of such foreign state, shall be subject to the increased rates of duty specified in the proclamation ; or in the case of duty-free imports from such foreign state, all such imports or such of them as are named in the proclamation, being the product of the offending foreign state, shall become dutiable at the rates of duty speci- fied in the proclamation ; or, in the case of the prohibition of importation, such articles of merchandise as the President shall have selected and named in his proclamation, being the product of the said offending foreign state, shall not be en- APPENDIX 329 titled to entry at any of the ports of the United States, and the importation thereof shall be prohibited. All articles of merchandise imported contrary to this act shall be forfeited to the United States, and shall be liable to be seized, prosecuted, and condemned, in like manner and under the same regula- tions, restrictions, and provisions as have been heretofore es- tablished for the recovery, collection, distribution, and remis- sion of forfeitures to the United States by the several revenue laws. "Whenever the provisions of this act shall be applicable to importations into the United States of the products of any foreign state, they shall be applicable thereto whether such products are imported directly from the country of produc- tion or otherwise. The President may at any time by procla- mation, which shall be effective upon a date to be specified therein, revoke, modify, terminate, or renew any such direc- tion hereinbefore authorized as, in his opinion, the public in- terest may require. To secure information to assist the Presi- dent in the discharge of the duties imposed upon him by this section and the officers of the Government in the administra- tion of the customs laws, the President is hereby authorized to employ such persons as may be required. ' ' Nothing in this act contained shall be so construed as to abrogate or in any manner impair or affect the provisions of any act of Congress to promote the reciprocal trade relations of the United States with another country. 4 REJECTED PROVISION OF THE UNDERWOOD BILL OF 1913 That whenever the President shall ascertain as a fact that any country, dependency', colony, province, or other political subdivision of government imposes any restrictions, either in the way of tariff rates or provisions, trade or other regula- tions, charges or exactions, or in any other manner, directly or indirectly, upon the importations into or sale in such foreign country of any agricultural, manufactured, or other product of the United States which unduly or unfairly discriminates against the United States or the products thereof; or when- ever he shall ascertain as a fact that any such country, de- pendency, colony, province, or other political subdivision of government imposes any restriction or prohibition upon the 330 AMERICAN FOREIGN TRADE exportation of any article to the United States which unduly or unfairly discriminates against the United States; or when- ever he shall ascertain as a fact that any such country, de- pendency, colony, province, or other political subdivision of government does not accord to the products of the United States reciprocal and equal or equivalent treatment, he shall have the power and it shall be his duty to suspend by procla- mation the operation of the provisions of this Act relative to the rates of duty to be assessed upon the importation of the following specified articles, or such of them as he may deem just and applicable, and to substitute therefor the rates of duty hereinafter prescribed upon such articles when imported directly or indirectly from such country, dependency, colony, province or other political subdivision of government : Fish, fresh, smoked, and dried, pickled, or otherwise pre- pared; coffee; tea; lime; earthen, stone, and china ware; lemons; coal, bituminous culm slack and shale and composi- tions used for fuel in which coal and coal dust is the com- ponent material of chief value whether in briquets or other form; cheese; wines of all kinds; malt liquors; knitted goods; silk dresses and silk goods; leather gloves; laces and em- broideries, of whatever material composed, and articles made wholly or in part of the same; toys; jewelry, precious and semiprecious and imitation precious stones, suitable for use in the manufacture of jewelry; sugars, tank bottoms, sirup of cane juice and concentrated molasses, testing by the polari- scope not above seventy-five degrees; molasses; wool; vege- table oils. On the issuance of such proclamation and until its revoca- tion there shall be levied, collected, and paid upon all articles covered thereby, when imported directly or indirectly from the place mentioned therein, the following rates: On fish, fresh, smoked, and dried, pickled, or otherwise pre- pared, 1 cent per pound; on coffee, 3 cents per pound; on tea, 10 cents per pound; lime, 10 per centum ad valorem; on the following articles one and one-fourth times the rate specified in section one of this Act, namely, on earthen, stone, and china ware; expressed oils; lemons; cheese; wines of all kinds; malt liquors; knitted goods; silk dresses and silk goods; APPENDIX 331 leather gloves; laces and embroideries, of whatever material composed, and articles made wholly or in part of the same; toys; jewelry and precious, semiprecious, and imitation pre- cious stones, suitable for use in the manufacture of jewelry. On the following, in addition to the duties as provided in sec- tion one of this Act, the duties specified below : On sugars, tank bottoms, sirup of cane juice and concen- trated molasses, testing by the polariscope not above seventy- five degrees, fifteen-hundredths cent per pound, and for every additional degree by the polariscope test, one one-hundredth cent per pound; on molasses, 2 cents per gallon. On wool of the sheep, hair of the Angora goat, alpaca and other like animals, and all wools and hair on the skins of such animals, and all wool wastes by whatever description known, 15 per centum ad valorem. On coal, bituminous, and shale, 45 cents per ton of twenty- eight bushels, eighty pounds to the bushel; coal slack or culm, such as will pass through a half-inch screen, and briquets of which coal and coal dust is the component part of chief value, 15 cents per ton of twenty-eight bushels, eighty pounds to the bushel. And the President may provide for drawbacks for the re- funding of the duty paid upon any such coal, culm, or slack imported for the purpose of being used for fuel upon vessels propelled by steam and engaged in trade with foreign coun- tries or between Atlantic and Pacific ports of the United States and which vessels are registered under the laws of the United States. That whenever the President shall ascertain as a fact that such restriction or prohibition or lack of accord of reciprocal and equivalent treatment has ceased, he shall have the power and it shall be his duty to revoke such proclamation, where- upon the articles covered thereby, when imported from the place mentioned therein, shall pay the rates of duty otherwise provided by law. But this provision shall not be applicable beyond the period of three years after the date of the passage of this Act unless Congress shall otherwise prescribe. 332 AMERICAN FOREIGN TRADE B — HAITIAN FISCAL PROTECTORATE TREATY (Proclaimed May 3, 1916) ARTICLE I The Government of the United States will, by its good offices, aid the Haitian Government in the proper and efficient de- velopment of its agricultural, mineral and commercial re- sources and in the establishment of the finances of Haiti on a firm and solid basis. ARTICLE II The President of Haiti shall appoint, upon nomination by the President of the United States, a General Receiver and such aids and employees as may be necessary, who shall collect, receive and apply all customs duties on imports and exports accruing at the several custom houses and ports of entry of the Republic of Haiti. The President of Haiti shall appoint, upon nomination by the President of the United States, a Financial Adviser, who shall be an officer attached to the Ministry of Finance, to give effect to whose proposals and labors the Minister will lend efficient aid. The Financial Adviser shall devise an adequate system of public accounting, aid in increasing the revenues and adjusting them to the expenses, inquire into the validity of the debts of the Republic, enlighten both Governments with reference to all eventual debts, recommend improved methods of collecting and applying the revenues, and make such other recommendations to the Minister of Finance as may be deemed necessary for the welfare and prosperity of Haiti. article m The Government of the Republic of Haiti will provide by law or appropriate decrees for the payment of all customs duties to the General Receiver, and will extend to the Receiv- ership, and to the Financial Adviser, all needful aid and full protection in the execution of the powers conferred and duties imposed herein ; and the United States on its part will extend like aid and protection. APPENDIX 333 ARTICLE IV Upon the appointment of the Financial Adviser, the Gov- ernment of the Eepublic of Haiti, in cooperation with the Financial Adviser, shall collate, classify, arrange and make full statement of all the debts of the Republic, the amounts, character, maturity and condition thereof, and the interest accruing and the sinking fund requisite to their final dis- charge. ARTICLE V All sums collected and received by the General Receiver shall be applied, first, to the payment of the salaries and allow- ances of the General Receiver, his assistants and employees and expenses of the Receivership, including the salary and expenses of the Financial Adviser, which salaries will be de- termined by previous agreement; second, to the interest and sinking fund of the public debt of the Republic of Haiti ; and, third, to the maintenance of the constabulary referred to in Article X, and then the remainder to the Haitian Government for purposes of current expenses. In making these applications the General Receiver will pro- ceed to pay salaries and allowances monthly and expenses as they arise, and on the first of each calendar month, will set aside in a separate fund the quantum of the collection and receipts of the previous month. ARTICLE VI The expenses of the Receivership, including salaries and allowances of the General Receiver, his assistants and em- ployees, and the salary and expenses of the Financial Ad- viser, shall not exceed five per centum of the collections and receipts from customs duties, unless by agreement by the two Governments. ARTICLE VII The General Receiver shall make monthly reports of all col- lections, receipts and disbursements to the appropriate officer of the Republic of Haiti and to the Department of State of the United States, which reports shall be open to inspection and verification at all times by the appropriate authorities of each of the said Governments. 334 AMERICAN FOREIGN TRADE ARTICLE VIII The Republic of Haiti shall not increase its public debt except by previous agreement with the President of the United States, and shall not contract any debt or assume any financial obligation unless the ordinary revenues of the Re- public available for that purpose, after defraying the ex- penses of the Government, shall be adequate to pay the inter- est and provide a sinking fund for the final discharge of such debt. ARTICLE IX The Republic of Haiti will not without a previous agree- ment with the President of the United States, modify the customs duties in a manner to reduce the revenues there- from; and in order that the revenues of the Republic may be adequate to meet the public debt and the expenses of the Government, to preserve tranquillity and to promote material prosperity, the Republic of Haiti will cooperate with the Financial Adviser in his recommendations for improvement in the methods of collecting and disbursing the revenues and for new sources of needed income. ARTICLE X The Haitian Government obligates itself, for the preserva- tion of domestic peace, the security of individual rights and full observance of the provisions of this treaty, to create with- out delay an efficient constabulary, urban and rural, composed of native Haitians. This constabulary shall be organized and officered by Americans, appointed by the President of Haiti, upon nomination by the President of the United States. The Haitian Government shall clothe these officers with the proper and necessary authority and uphold them in the performance of their functions. These officers will be replaced by Haitians as they, by examination, conducted under direction of a board to be selected by the senior American officer of this constabu- lary and in the presence of a representative of the Haitian Government, are found to be qualified to assume such duties. The constabulary herein provided for, shall, under the direc- tion of the Haitian Government, have supervision and control of arms and ammunition, military supplies, and traffic therein, APPENDIX 335 throughout the country. The high contracting parties agree that the stipulations in this Article are necessary to prevent factional strife and disturbances. ARTICLE XI The Government of Haiti agrees not to surrender any of the territory of the Eepublic of Haiti by sale, lease, or other- wise, or jurisdiction over such territory, to any foreign gov- ernment or power, nor to enter into any treaty or contract with any foreign power or powers that will impair or tend to impair the independence of Haiti. ARTICLE XII The Haitian Government agrees to execute with the United States a protocol for the settlement, by arbitration or other- wise, of all pending pecuniary claims of foreign corporations, companies, citizens or subjects against Haiti. article xra The Republic of Haiti, being desirous to further the develop- ment of its natural resources, agrees to undertake and execute such measures as in the opinion of the high contracting parties may be necessary for the sanitation and public improvement of the Republic, under the supervision and direction of an engineer or engineers, to be appointed by the President of Haiti upon nomination by the President of the United States, and authorized for that purpose by the Government of Haiti. article xnr The high contracting parties shall have authority to take such steps as may be necessary to insure the complete attain- ment of any of the objects comprehended in this treaty ; and, should the necessity occur, the United States will lend an effi- cient aid for the preservation of Haitian Independence and the maintenance of a government adequate for the protection of life, property and individual liberty. ARTICLE xv The present treaty shall be approved and ratified by the high contracting parties in conformity with their respective 336 AMERICAN FOREIGN TRADE laws, and the ratifications thereof shall be exchanged in the City of "Washington as soon as may be possible. ARTICLE XVI The present treaty shall remain in full force and virtue for the term of ten years, to be counted from the day of exchange of ratifications, and further for another term of ten years if, for specific reasons presented by either of the high contracting parties, the purpose of this treaty has not been fully ac- complished. C — CHINA AND THE PACIFIC 1 OPEN" DOOR POLICY SECRETARY HAY TO MINISTER BUCK This Government, animated with a sincere desire to insure to the commerce and industry of the United States and of all other nations perfect equality of treatment within the limits of the Chinese Empire for their trade and navigation, espe- cially within the so-called " spheres of influence or interest " claimed by certain European powers in China, has deemed the present an opportune moment to make representations in this direction to Germany, Great Britain, and Russia. To obtain the object it has in view and to remove possible causes of international irritation and reestablish confidence so essential to commerce, it has seemed to this Government highly desirable that the various powers claiming ' ' spheres of inter- est or influence " in China should give formal assurances that — First. They will in no way interfere with any treaty port or any vested interest within any so-called " sphere of inter- est ' ' or leased territory they may have in China. Second. The Chinese treaty tariff of the time being shall apply to all merchandise landed or shipped to all such ports as are within said " sphere of interest " (unless they be " free ports "), no matter to what nationality it may belong, and that duties so leviable shall be collected by the Chinese Government. Third. They will levy no higher harbor dues on vessels of another nationality frequenting any port in such " sphere " APPENDIX 337 than shall be levied on vessels of their own nationality, and no higher railroad charges over lines built, controlled, or operated within such ' ' sphere ' ' on merchandise belonging to citizens or subjects of other nationalities transported through such " sphere " than shall be levied on similar merchandise belonging to their own nationals transported over equal dis- tances. The policy pursued by His Imperial German Majesty in declaring Tsingtao (Kiaochao) a free port and in aiding the Chinese Government in establishing there a custom-house, and the ukase of His Imperial Russian Majesty of August 11 last in erecting a free port at Dalny (Talienwan) are thought to be proof that these powers are not disposed to view unfavor- ably the proposition to recognize that they contemplate noth- ing which will interfere in any way with the enjoyment by the commerce of all nations of the rights and privileges guar- anteed to them by existing treaties with China. Repeated assurances from the British Government of its fixed policy to maintain throughout China freedom of trade for the whole world insure, it is believed, the ready assent of that power to our proposals. It is no less confidently believed that the commercial interests of Japan would be greatly served by the above-mentioned declaration, which harmonizes with the assurances conveyed to this Government at various times by His Imperial Japanese Majesty's diplomatic representative at this capital. You are therefore instructed to submit to His Imperial Japanese Majesty's Government the above considerations, and to invite their early attention to them, and express the earnest hope of your Government that they will accept them and aid in securing their acceptance by the other interested powers. I am, etc., John Hay. VISCOUNT AOKI TO MR. BUCK [Translation.] Department op Foreign Affairs, Tokio, the 26th day, the 12th month of the 32d year of Meiji. (December 26, 1899.) Mr. Minister : I have the honor to acknowledge the receipt 338 AMEEICAN FOEEIGN TEADE of the note No. 176 of the 20th instant, in which, pursuing the instructions of the United States Government, your ex- cellency was so good as to communicate to the Imperial Gov- ernment the representations of the United States as presented in notes to Eussia, Germany, and Great Britain on the subject of commercial interests of the United States in China. I have the happy duty of assuring your excellency that the Imperial Government will have no hesitation to give their assent to so just and fair a proposal of the United States, pro- vided that all the other powers concerned shall accept the same. I avail myself, etc., Viscount Aoki Sitjzo, Minister for Foreign Affairs. 2 — root-takahira declaration imperial japanese embassy washington November 30, 1908. Sir: The exchange of views between us, which has taken place at the several interviews which I have recently had the honor of holding with you, has shown that Japan and the United States holding important outlying insular possessions in the region of the Pacific Ocean, the Governments of the two coun- tries are animated by a common aim, policy, and intention in that region. Believing that a frank avowal of that aim, policy, and in- tention would not only tend to strengthen the relations of friendship and good neighborhood, which have immemorially existed between Japan and the United States, but would ma- terially contribute to the preservation of the general peace, the Imperial Government have authorized me to present to you an outline of their understanding of that common aim, policy, and intention: 1. It is the wish of the two Governments to encourage the free and peaceful development of their commerce on the Pacific Ocean. 2. The policy of both Governments, uninfluenced by any APPENDIX 339 aggressive tendencies, is directed to the maintenance of the existing status quo in the region above mentioned and to the defense of the principle of equal opportunity for commerce and industry in China. 3. They are accordingly firmly resolved reciprocally to re- spect the territorial possessions belonging to each other in said region. 4. They are also determined to preserve the common inter- est of all powers in China by supporting by all pacific means at their disposal the independence and integrity of China and the principle of equal opportunity for commerce and industry of all nations in that Empire. 5. Should any event occur threatening the status quo as above described or the principle of equal opportunity as above defined, it remains for the two Governments to communicate with each other in order to arrive at an understanding as to what measures they may consider it useful to take. If the foregoing outline accords with the view of the Gov- ernment of the United States, I shall be gratified to receive your confirmation. I take this opportunity to renew to Tour Excellency the as- surance of my highest consideration. K. Takahira. Honorable Elihu Boot, Secretary of State. 3 — LANSING-ISHn AGREEMENT [The Secretary of State to the Ambassador Extraordinary and Plenipotentiary of Japan, on Special Mission.] Department of State, Washington, November 2, 1917. Excellency : I have the honor to communicate herein my understanding of the agreement reached by us in our recent conversations touching the questions of mutual interest to our Governments relating to the Republic of China. In order to silence the mischievous reports that have from time to time been circulated, it is believed by us that a pub- lic announcement once more of the desires and intentions 340 AMERICAN FOREIGN TRADE shared by our two Governments with regard to China is ad- visable. The Governments of the United States and Japan recog- nize that territorial propinquity creates special relations be- tween countries, and, consequently, the Government of the United States recognizes that Japan has special interests in China, particularly in the part to which her possessions are contiguous. The territorial sovereignty of China, nevertheless, remains unimpaired and the Government of the United States has every confidence in the repeated assurances of the Imperial Japanese Government that while geographical position gives Japan such special interests they have no desire to discrimi- nate against the trade of other nations or to disregard the commercial rights heretofore granted by China in treaties with other powers. The Governments of the United States and Japan deny that they have any purpose to infringe in any way the inde- pendence or territorial integrity of China and they declare furthermore, that they always adhere to the principle of the so-called ' ' Open Door ' ' or equal opportunity for commerce and industry in China. Moreover, they mutually declare that they are opposed to the acquisition by any Government of any special rights or privileges that would affect the independence or territorial integrity of China or that would deny to the subjects or citi- zens of any country the full enjoyment of equal opportunity in the commerce and industry of China. I shall be glad to have Your Excellency confirm this under- standing of the agreement reached by us. Accept, Excellency, the renewed assurance of my highest consideration. Robert Lansing APPENDIX 341 His Excellency Viscount Kikujtro IsHn, Ambassador Extraordinary and Plenipo- tentiary of Japan, on Special Mission. [The Ambassador Extraordinary and Plenipotentiary of Ja- pan, on Special Mission, to the Secretary of State.] The Special Mission of Japan, Washington, November 2, 1917. Sir: I have the honor to acknowledge the receipt of your note of to-day, communicating to me your understanding of the agreement reached by us in our recent conversations touching the questions of mutual interest to our Govern- ments relating to the Kepublic of China. I am happy to be able to confirm to you, under authoriza- tion of my Government, the understanding in question set forth in the following terms: In order to silence mischievous reports that have from time to time been circulated, it is believed by us that a public an- nouncement once more of the desires and intentions shared by our two Governments with regard to China is advisable. The Governments of Japan and the United States recog- nize that territorial propinquity creates special relations be- tween countries, and, consequently, the Government of the United States recognizes that Japan has special interests in China, particularly in the part to which her possessions are contiguous. The territorial sovereignty of China, nevertheless, remains unimpaired and the Government of the United States has every confidence in the repeated assurances of the Imperial Japanese Government that while geographical position gives Japan such special interests they have no desire to discrimi- nate against the trade of other nations or to disregard the commercial rights heretofore granted by China in treaties with other Powers. The Governments of Japan and the United States deny that they have any purpose to infringe in any way the inde- pendence or territorial integrity of China and they declare, furthermore, that they always adhere to the principle of the 342 AMEKICAN FOEEIGN TKADE so-called " Open Door " or equal opportunity for commerce and industry in China. Moreover, they mutually declare that they are opposed to the acquisition by any government of any special rights or privileges that would affect the independence or territorial integrity of China or that would deny to the subjects or citi- zens of any country the full enjoyment of equal opportunity in the commerce and industry of China. I take this opportunity to convey to you, Sir, the assurances of my highest consideration. K. Ishii Ambassador Extraordinary and Plenipotentiary of Japan on Special Mission. Honorable Robert Lansing, Secretary of State. INDEX Adams, John Q., quoted on favored nations, 121 Agriculture, in relation to foreign trade, 7-32 "Agricultural Year Book, 1918," cited, 22-28 Alabama, 48 Algeria, 60, 154 Alliances, Economic, cited, 74 America. See United. States "American Trade Policy," cited, 79 Anglo-Chinese Commercial Treaty, 289 Anglo- French Treaty ( Cobden Treaty), quoted, 81 Anglo-Japanese Treaty, 89 et seq., 274 Aoki, Viscount, letter of, quoted, 337, 338 Argentine Republic, 9, 10, 100, 144; as an economic ideal, 192, 193, 201; population of, 204 Arthur, Chester A., 112, 302 Asia Minor: possibilities of, in cotton production, 28 Asquith, Premier: attitude of, to- ward public houses, 40; quoted on free trade, 93, 94 Australia, 31, 60, 87, 93, 97, 99, 100 Austria-Hungary, 83, 113, 144 Bagdad Railway, The, 72 Balfour, Arthur J., attitude of, to- ward England's tariff policy, 94 Balfour Commission, The, 96 Balkan States, 154, 171 Barcelona, 87 Barker, J. Ellis, "Britain's Com- 343 ing Industrial Supremacy," cited, 55 Bathurst, Lord, 90 Beaulieu, Pierre Leroy : " The United States in the Twentieth Century," by, quoted, 140, 141; 283 Belgium: German Army in, 55; 144, 212, 226 Bingham, Mr., 122 Birmingham, 9, 49, 57 Blaine, James G. : attitude of, to- ward foreign trade, 11; 92 ; com- mercial policy of, 112 et seq.; 117; attitude of, toward South- American trade, 214 Bohemia, 163 Bolivia, 144; products of, 197; 201 Bolshevism, 76 Bordeaux, 65 Boycott, 77 Bradford, 43 Brazil: 4, 10, 27; ore-beds of, 48; 49, 57, 65, 113, 117, 185 Brazilian Preference, 216 " Britain's Coming Industrial Su- premacy," by J. Ellis Barker, 55 British Africa: cotton production in, 27; 101 British Columbia, 51 British Empire, trade policy of, 88, 89, 90-109 British' Italian Corporation, 104, 105 British Labor Mission, 45, 46 British-Paraguayan Treaty of 1884, quoted, 80 British Trading Company, 103 British West Indies: cotton pro- 344 INDEX duction in, 27; 114; 237 et seq. Bryan, William Jennings, atti- tude of, toward Santo Domingo question, 245 Buchanan Treaty, 114 Budget of 1919, The, 98, 99 Buenos Aires, 9, 114, 121 Bulgaria, 83, 170 Bureau of Foreign and Domestic Commerce, statistical table of the, 12, 13 Burke, Edmund, quoted on Eng- land's trade, 90 Butterworth, Benjamin, 260 Cacao, 188 California, oil reserves in, 53 Calvo Doctrine, 298 Canada: 10, 31; in relation to tariff question, 87 et seq.; 93, 97, 99, 100, 112; relation of nat- ural resources of, to foreign trade, 247 et seq. Canadian Reciprocity Agreement, 115, 116, 123 Canadian-West Indian Trade Agreement: 239; leading points of, 240, footnote Cargo-carriers, 140-152 Carnegie, cited on Great Britain's ore supplies, 56, 57 Caribbean Commerce, 232 et seq. Cattle: as a source of prosperity, 25; 26, 119; Brazilian, 188 Central America, 113, 114, 242 " Central Europe," translation by Christobel M. Meredith, of Nau- mann's "Mittel Europa," cited, 160 Cereals, effect of war on produc- tion of, 22 et seq. Cerro de Pasco, 195, 229 Chamberlain, Joseph H. : attitude of, toward foreign trade, 91 et seq.; quoted, 92, 93, footnote; Austin, budget of 1919, 98 Chattanooga, 9 Chemicals, 132 Chevalier, Michel, quoted on pro- ductive power, 37 Chicago, 9 Chile: 9, ore-beds of, 48; 51, 103, 194, 195, 201 China: cotton production in, 27; in relation to ore, 48; corre- spondence relative to, and the Pacific, 336-342; the question of, 277; economic study of, 278 et seq. Chuquicamatu copper, 229 Civil War : condition of foreign trade at close of, 14; trade treaties after, 111 et seq.; mer- chant marine at time of, 142 Clay, Henry: quoted on industrial progress, 37; attitude of, toward South American countries, 214 Cleveland, Grover, 112, 302 Coal: transportation of, 19; world's, reserves, 48 et seq.; in France, 60, 61 Coats, R. H., 248, footnote Cobden, Richard, quoted, 47 Cobden Treaty (Anglo-French) : 69; quoted, 80, 81 Coffee, Brazilian, 188 Coke, Thomas, 234 Colombia: 4, 49, 53, 144; products of, 198, 199 Combinations, export, see Webb- Pomerene Act Commerce : the diplomacy of, 62- 73. See Foreign trade Consortium, Chinese, 288; 305 Constantinople, as an international port, 168 et seq. " Contemporary Politics in the Far East," by Prof. Stanley K. Hornbeck, 287 Continental Congress, 66, 67 Conyngton, Mary, "Effect of the War upon the Employment of Women," cited, 44 INDEX 345 Copper, productive, areas, 50 et seq. Corn: relation of to foreign trade, 24, 25; duty on, proposed by Chamberlain, 93, footnote Cornwall, 57 Costa Rica, 144 Cotton: transportation of, 10; as a factor in foreign trade, 26 et seq.; Asia Minor as » possible producer of, 28, 29; areas of the world, 27-29; 87, 145, 162; in Brazil, 188 " Course of Political Economy," Chevalier, quoted, 37 Cuba, 48, 49, 123, 234 et seq. Cuban Constitutional Convention, 123 Cuban Reciprocity Treaty, 114, 115, 123 Cyprus, 28 Czecho-Slovak State, 163 Dairy produce, export prospects of, 26 Dakota, 10 Deere, John, effect of, on trade expansion, 13, 14 De Forrest, David V., 121 De Mille, James, "The Dodge Club," quoted, 62 Denmark, 144 Department of Agriculture: esti- mate of, on food wastage, 21; cited on cattle, 25, footnote; 32 Dexter, Timothy, 233 Dingley: tariff, 113; Act, 114 " Diplomacy of the United States," by Theodore Lyman, quoted, 111 Disraeli, Benjamin: definition by, of trade diplomacy, 66 "Dodge Club, The," by James de Mille, quoted, 62, 66 Drago, Dr. Luis M., 298 Dumping in South America, 222 Dutch East Indies: cotton produc- tion in, 27 Dyes, 132 Ecuador: industrial, 197; 201 " Effect of the War upon the Em- ployment of Women in Eng- land," by Mary Conyngton, cited, 44 Efficiency, machinery and national- ized, 33-46 Egypt, cotton production in, 27 et seq. Elgin, Lord, 68 Elgin-Marey Treaty, 111, 259 Emerson, Ralph Waldo, cited, 37 England : industrial organization of, 33-36; prohibition in, 39 et seq.; status of industrial woman in, 43-46; tin-plate industry in, 52; object sought by, in Me- thuen Treaty, 63 et seq.; 65, 71, 82, 86; trade policy of, 88, 89, £0 et seq. See also British Em- pire and Great Britain Entente control, 77 Export taxes, British, 100, 101; South American, 184 et seq. Farmer, American: as a business man, 20 et seq. Favored Nations, European con- struction, 78 et seq.; American construction, 120 et seq. Federal Reserve Act, 17 Federal Trade Commission, 133 et seq., 318 Ferrero, cited, 36 Pood, wastage of, in United States, 21, 22 Foreign Intelligence Bureau, 106 Foreign trade: defined, 3-18; ef- fect of Great War on, 4 et seq.; relation of, to domestic prosper- ity, 11 et seq.; table showing relation of, to internal trade, 12, 13; condition of, at close of Civil War, 14 ; the farm in, 19- 32; cattle as a factor in, 24, 25; 346 INDEX cotton in relation to, 26 et seq.; diplomacy of, 62-73; economic league in relation to, 74-89; boycotts and, 77; British, pol- icy, 88-109; policy of the United States, 89; Australia and, 93; and Canada, 93; key to British, policy, 109; United States and, 110-139; German, 158 et seq.; relations with Rus- sia and near East, 168-182; South America and, 183-199; attitude of Blaine toward, 214; in Caribbean, 232-247; relation of Canada's natural resources to, 249 et seq.; Japan and, 265- 276; tables showing shifting of South American, 221, 222; China and the Pacific, 277-290 Foster, John W., 113 France: agricultural area of, 30; industrial women in, 42; ore re- sources of, 48; 66, 70, 71, 82, S3, 114; factors in industrial recon- struction of, 153 Frankfort, Treaty of, 79 Franklin, Benjamin, 184 Free trade, British Empire and, 90-109, passim Frelinghuysen, Secretary, quoted on favored nations, 122, 123 Galveston, 10 Garfield, President, 302 " Geography of the World's Agri- culture," cited, 26 George, King, attitude of, toward liquor, 40 Germany: economic attitude of, toward Asia Minor, 28, 29; ore resources of, 48; 60; attitude of, toward commercial treaties, 68, 69; 71; attitude of, toward tar- iff, 82 et seq.; 113, 119, 144, 160 et seq., 173 Ghent, Treaty of, 122 Glasgow, 57 Grant, Ulysses S., treaty of, with Mexico, 112 Great Britain : dependence of mills of, on United States cotton, 27; ore resources of, 48; iron and steel industries of, 57 et seq.; 71, 144; control of South Amer- ican trade by, 206; trade of, with China, 281 et seq. See also British Empire and Eng- land Greece, 83, 144, 172 Haiti, 234, 236 Haitian Fiscal Protectorate Treaty: 246; text of, 332-336 Halsey, Frederick M., 207, footnote Hanseatic Bepublic, 144 Harrison, President, 113 Hawaiian Reciprocity Treaty, 112, 123 Hay, John: open door policy of, 283; letter of, on policy, 336, 337 Hitt, Robert R., 260 Holland, 144, 165 Honduras, 144 Hornbeck, Prof. Stanley K., 287, footnote; 303 Hungary, 163 Hurley, E. ST., 148, footnote Hussey, 14 Imperial War Conference, 96 Imperial Preference, see British Empire, trade policy of India: cotton production in, 27; 31, 36, 57, 60, 97, 175 International Institute of Agricul- ture, Rome, 32 Investments, British in South America, 207; U. S. in South America, 229, 230 Iowa, 7 Iron: Lorraine, 60; tariff on, 84 et seq.; Canadian, 256; Brazil- ian, 189; Chilean, 195 INDEX 347 "Iron Ore Resources of the World," cited, 47 Ishii, Kikujiro: agreement of, with Lansing, correspondence, 339- 342 Italy, 10, 82, 83, 144, 105, 165 Italians in South America, 204 Jamaica, 42, 97, 238 et seq. Japan: cotton production in, 27; 70, 78, 112, 144; study of indus- trial, 265-276 " Japan : Trade during the War," quoted, 274, 275 Jefferson, Thomas, attitude of, on reciprocity, 110 Jugo-Slavia, 170 Kansas City, 10 Kasson, John A., 114 Knox, Secretary: quoted on com- mercial discrimination, 128, 129; 178; quoted, 273; 295 Krupp, Dr. Gustav: 158; quoted, 159 Lansing-Ishii Agreement : 285, 286, 288; text of, 339-342 Lansing, Robert, quoted on loans to China, 295 Laurier, Sir Wilfrid, 260 Law, Bonar, and England's tariff policy, 94 League of Nations, 77 et seq., 305 Lee, Arthur, 67 Leeds, 43 Leeward Islands, cotton produc- tion in, 28 Liberia, 144 List, Friedrich: attitude of, to- ward Methuen Treaty, 66; quoted, 111 Liverpool, 10, 57 Livestock, production of, 22 et seq. Lloyd George, David: attitude of, toward public bouses, 40; in re- lation to foreign trade, 91; 100, 101 Lorraine, 61, 121 Luxemburg, 48 Lyman, Theodore, quoted, 111 Madagascar, 155 Maine, 48 Magellan Straits, 187, 195 Malay Straits, 52, 57 Manganese, sources of, 50; Brazil- ian, 189; Russian, 175 Marco Polo, 180 Marcy, Secretary, 68, 112 Maryland, 49 McKinley, President, 114 McKinley Tariff Bill: 112, 113; text of reciprocity sections, 322-331 McCormick, Cyrus, 14 Meat, production of, see Livestock Mecklenburg-Schwerin, 144 Megata, Baron, 287 Methuen Treaty: 63 et seq.; mod- ernized application of, 86 Mexico, 4, 10 Mill, John Stuart, on free trade, 87 "Mittel Europa," by Friedrich Naumann, cited, 160 "Monroe Doctrine and The Can- ning Myth, The," by Charles H. Sherrill, 207 Moore, " International Law Di- gest," 123, footnote Morocco, 154 Naumann, Friedrich, Mid-Euro- pean scheme of, 159 et seq. Newfoundland, ore-beds of, 48, 49 New South Wales, wool supply, 60 New Zealand, 97 Nile, cotton growing on the, 27, 28 Nitrates, 185; Chilean, 194, 224 Nova Scotia, 256 Norway, 83, 144 348 INDEX Ohio, coal of, 49 Oil, industrial uses of, 52 et seq. Oliphant, Lawrence, 68 Oliver, John, effect of, on trade expansion, 14 Oporto, 65 Ore, world's, resources, 47 et seq. Osborne, John Ball, 123, footnote Palmerston, Lord, quoted on com- mercial diplomacy, 67, 68 Panama Canal, 9, 51 Panama Canal Act, 143 Paraguay, 144, 193 Paris, industrial women in, 43 Paris Pact of 1916, The, 74 et seq. Patagonia, agricultural reclama- tion of, 204 Patent Acts, Lloyd George in re- lation to, 101 Patten, Prof. Simon ST., 244, foot- note Payne-Aldrieh Act, 117-119, 130 Peace Conference, 286 Peace Treaty, 305 Perry, Commodore, 267 Persia, 71 Peru, 9, 25, 51, 195, 201, 202 " Petroleum Resources of the United States," by M. L. Eequa, cited, 54 Pittsburg, industrial area of, 49 Piatt Amendment, 123 Poland: economic development of, 88; 178, 179 Porto Rico, 234, 236 Port Said, 42 Portugal: Methuen Treaty and, 64, 65; 83 Potash, 133 Pratt, Dr. E. E., quoted on crops in relation to prosperity, 29, 30 Price Lists, 136 Prohibition, in England, 39 et seq. Protection, British Empire and, 90-109, passim Prussia, 144 Quesnay, 76 Railway Rates, export, British, 100; U. S., 137 Reciprocity Agreement of 1911,, The, 260 et seq. " Reciprocity and Commercial Treaties," 80, footnote " Reciprocity Treaties, Favored Nation Clauses," John Ball Os- borne, 123 "Reforming the Liquor Trade in Great Britain," 42, footnote Requa, M. L., " Petroleum Re- sources of the United States," cited, 54 Rio de Janeiro, loan, 228 Rittman Process, 53 Roosevelt, Theodore, negotiation of treaty with Cuba by, 114 Root, Elihu: quoted on commercial intercourse with South America, 214, 215; 217; negotiation of Santo Domingo debt by, 245; 264, 284 Root-Takahira Declaration, 338- 339 Rubber, Brazilian, 187 Rumania, 83, 170, 171 Russia: cotton production in, 27, 28; ore production in, 50; 52, 71, 83, 87, 88, 154 San Paulo loan, 228 Santo Domingo : 113; management of by United States, 244 et seq. Seaman's Act, 149 Serbia, 83 Shanghai International Commis- sion, 289 Sherrill, Charles H., author of " The Monroe Doctrine and the Canning Myth," 207 Shipping Board, 147 et seq. Shipping Law, 147 Siberia, 180 INDEX 349 Silk, Italian, 165; Japanese, 268; Chinese, 278 Smith, Adam, attitude of, toward Methuen Treaty, 65, 66 Smyrna, 71, 72 South Africa, 60, 97, 99 South America: 31, 113, 154; as a commercial and economic field, 183-199; population, 186; as a market for Europe, 200-213; German colonization plan in, 210-213; as a market for the United States, 214-231 " South America an Export Field," by Otto Wilson, 201-202, foot- note Spain: 10; ore resources of, 48; 57, 83, 87; Arthur's Treaty with, 112; 144; economic pol- icy of, 184 Spanish West Indies, 113 Spencer, Herbert, advice of, to Baron Kaneko on Japanese trade policy, quoted, 266, 267 Stamp, Dr. J. C, 287, footnote Straits Settlements, 101 Sudan, cotton growing in the, 27, 28 Sugar, value of Cuban production, 235, 236 Sweden, 57, 144 Switzerland, 83 Taft, President: 130, 143, 177, 260; Central American policy of, 244, 245 ; attitude of, toward American foreign investments, 295; 303 Takahira, Baron: 284; letter of, to Root, 338-339 Tariff Act of 1913, The, 120 Tariff Commission, 130, 318 Tariff: maximum and minimum, schedules, 81 et seq.; English, 82; French, 82; German, 82; Italian, 82; Spain's attitude to- ward, 87; Australia and the, 87; Canada and the, 87; Russia and the, 87, 88; Balfour and the, 94; Cleveland and the, 112; McKinley and the, 114; attitude of Jefferson toward, 110; Grant and the, 112; Russian trade treaties under dual, 176 Temperament, in trade, 106 Texas, 10 Textiles, tariff on, 84, 85 Tin, from Bolivia, 51; 197; in China, 278 Ting, V. K., 279, footnote Tobacco, value of Cuban produc- tion, 236 Toronto Geological Congress 1912, The, 49, footnote Trade, balance of, 16 Trepoff Treaty, 169 Tunis, 60, 154 Turgot, 76 Turkestan, 28 Turkey, 154, 168 et seq. Ukraine, The, economic importance of, 179 Underwood-Simmons Act, 143 United States: benefits of foreign trade to, 8 et seq.; evolution of export trade of, 13 et seq.; food wastage in, 21, 22; distribution of ore in, 48 et seq.; resources of, 53, 54; influence of Paris Pact of 1916 on, 76; trade pol- icy of, 89; foreign policy of, 110-139; revival of, merchant marine, 140-152; relation of, to Continental Europe, 153-167; relation of, to Scandinavian group, 165; trade relations of, with Russia and the Near East, 168-182; economic destiny of, in Caribbean, 232-247 ; trade re- lations of Canada and, 259 et seq.; export of capital by, 284 "United States in the Twentieth Century, The," by Pierre Leroy 350 INDEX Beaulieu, quoted, 140, 141 Uruguay, 193 Valparaiso, 43 Venezuela: 4; products of, 198 Virgin Islands, 232 War, The Great: effect of, upon foreign trade, 4 et seq.; and in- dustrialism, 39 et seq. j effect of, upon France's raw materials, 60; effect of, upon trade diplo- macy, 72; economic alliances in relation to results of, 74 et seq.; tariff system at outbreak of, 81; British trade before and after, 91 et seq.; 125; effect of, upon American tonnage, 141 et seq.; expanded economy a consequence of, 153; 226; effect of, upon Japanese commercial activity, 271 et seq.; effect of, upon for- eign trade relations, 309; as a commercial educator, 320 Washington. See United States Water power, of the U. S., 55, 56; of Canada, 55 Webb-Pomerene Act, 133 et seq. West Indies, 10, 25, 114 Wheat, varying values, 7; statis- tics of production and export, 22 et seq. Whitley, 14 Wilson, James, 24, 25 Wilson, Otto, 201, 202, footnote Wilson, President: cited on for- eign trad e, 11; attitude of to- ward Paris Pact, 76; action of, in Santo Domingo matter, 245; in relation to Haitian Treaty, 246; 288; attitude of, toward foreign investments, 295; quoted on Chinese loan, 302 Wilson Tariff Act, 113, 117 Witte, Count Sergius de: influence of, on Russian industrial life, 87, 88; 175, 182 Woman, status of industrial, 43- 46 Wool, share of U. S. in world pro- duction, 55; England's supply, 60; South American sources, 191, 193, 195 Zinc, resources of U. S., 51 Zollverein, German, 82; South American, 201 I ■ ■:■' . '■■■Mva- I f9:M